Question

QUESTION 7

1. Who is responsible for implementing fiscal policy? Check all that apply.

   		Mayor
   		Congress
   		President
   		Federal Reserve Chairperson

QUESTION 8

1. If an economy has a high inflation that is negatively affecting the country, how could fiscal policy be used to combat this? Check all possible correct answers.

   		Cut taxes.
   		Raise taxes.
   		Cut government spending.
   		Raise government spending.
   		Cut interest rates.
   		Raise interest rates.

QUESTION 9

1. Suppose an economy is experiencing very high unemployment. How could each tool of fiscal policy be used to combat this problem? Check all possible correct answers.

   		Cut taxes.
   		Raise taxes.
   		Cut government spending.
   		Raise government spending.
   		Cut interest rates.
   		Raise interest rates.

Answer 1

7. Option B,C.

• Fiscal policy is used by the government to stabilize the economy during recessions and Inflation by adjusting it's spending and the revenue collected through taxes.
• Both the congress and the president is responsible for implementing fiscal policy in a country.

8. Option B,C.

• When an economy is facing high Inflation, it is producing more than its potential GDP.
• To combat this inflationary pressure, the government uses contractionary fiscal policy by raising the taxes and by cutting down the government spending.

9. Option D, A.

• We know that the two main tools used by fiscal policy are the government spending and taxes to regulate the level of inflation and recession in the Economy.
• The government uses expansionary fiscal policy inorder to overcome the unemployment rate in an economy by raising government spending and cutting down the taxes.
• Exapansionary fiscal policy boosts up the aggregate demand and increases the output and the employment rate.