Fiscal Policy and Economic Gaps
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Questions and Answers

What is the primary goal of fiscal policy?

  • To reduce budget deficits
  • To reduce government spending
  • To increase tax revenues
  • To achieve full employment or price stability (correct)

    • What type of gap exists when real GDP is less than potential GDP?

  • Fiscal gap
  • Inflationary gap
  • Economic gap
  • Recessionary gap (correct)

    • What is the cure for an inflationary gap?

  • Contractionary fiscal policy (correct)
  • Supply-side policy
  • Monetary policy
  • Expansionary fiscal policy

    • What is the result when government spending is more than tax revenues?

    <p>Budget deficit</p> Signup and view all the answers

    What is a challenge in implementing fiscal policy?

    <p>All of the above</p> Signup and view all the answers

    What is the opposite of a budget deficit?

    <p>Budget surplus</p> Signup and view all the answers

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