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Questions and Answers
What is the likely impact of fiscal policy on the future course of the economy in the scenario provided?
What is the likely impact of fiscal policy on the future course of the economy in the scenario provided?
- Neutral
- Uncertain
- Expansionary (correct)
- Contractionary
Which of the following best describes a disadvantage of using fiscal policy as a short-run economic tool?
Which of the following best describes a disadvantage of using fiscal policy as a short-run economic tool?
- Fiscal policy has no significant impact on the economy
- Indirect taxes are difficult to implement and have a delayed impact
- Capital spending plans take a long time to formulate and implement (correct)
- Direct taxes have very small expectational effects and long lead times
What does the economist's statement about fiscal deficits and tax cuts reflect?
What does the economist's statement about fiscal deficits and tax cuts reflect?
- Fisher effect
- Ricardian equivalence (correct)
- Keynesian economics
- Money neutrality
In the scenario provided, what is the effect of Country A's large fiscal deficit on private sector investment?
In the scenario provided, what is the effect of Country A's large fiscal deficit on private sector investment?
Which of the following is a potential drawback of using income tax cuts to stimulate GDP growth during a recession?
Which of the following is a potential drawback of using income tax cuts to stimulate GDP growth during a recession?
Why might a country with an independent central bank choose an expansionary monetary policy over a discretionary fiscal policy during a recession?
Why might a country with an independent central bank choose an expansionary monetary policy over a discretionary fiscal policy during a recession?
What effect can an extended period of GDP growth have on a country's budget balance?
What effect can an extended period of GDP growth have on a country's budget balance?
Which of the following is most likely to be considered a type of direct tax?
Which of the following is most likely to be considered a type of direct tax?
What is the main limitation of fiscal policy in stabilizing aggregate demand?
What is the main limitation of fiscal policy in stabilizing aggregate demand?
How does monetary policy differ from fiscal policy?
How does monetary policy differ from fiscal policy?
Which advantage of using a specific fiscal policy tool is highlighted in the text?
Which advantage of using a specific fiscal policy tool is highlighted in the text?
What is an advantage of automatic stabilizers over discretionary fiscal policy?
What is an advantage of automatic stabilizers over discretionary fiscal policy?
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