Podcast
Questions and Answers
What is the primary purpose of fiscal policy?
What is the primary purpose of fiscal policy?
- Regulating interest rates
- Increasing inflation levels
- Controlling trade policies
- Affecting aggregate demand (correct)
What does a 'Balanced' fiscal policy signify?
What does a 'Balanced' fiscal policy signify?
- Government spending is unrelated to taxation
- Government spending surpasses taxation
- Government spending equals taxation (correct)
- Government spending is less than taxation
Which type of fiscal policy involves government spending exceeding taxation?
Which type of fiscal policy involves government spending exceeding taxation?
- Expansionary (correct)
- Monetary
- Balanced
- Contractionary
How does fiscal policy aim to achieve full employment?
How does fiscal policy aim to achieve full employment?
What is the key economic concept influenced by fiscal policy to achieve price stability?
What is the key economic concept influenced by fiscal policy to achieve price stability?
What is the main objective of fiscal policy?
What is the main objective of fiscal policy?
In which type of fiscal policy does government spending exceed taxation?
In which type of fiscal policy does government spending exceed taxation?
What is a characteristic of contractionary fiscal policy?
What is a characteristic of contractionary fiscal policy?
How does fiscal policy impact aggregate demand?
How does fiscal policy impact aggregate demand?
Which situation would likely lead to the use of expansionary fiscal policy?
Which situation would likely lead to the use of expansionary fiscal policy?
Study Notes
Fiscal Policy
- Fiscal policy is the prime lever of economic stabilization policy, aiming to achieve higher economic growth, full employment, and price stability.
- It influences aggregate demand in the economy to achieve these goals.
Types of Fiscal Policy
- Balanced Fiscal Policy: Government spending (G) is equal to taxation (T), i.e., G = T.
- Expansionary Fiscal Policy: Government spending (G) is greater than taxation (T), i.e., G > T. This type of policy is used to stimulate economic growth.
- Contractionary Fiscal Policy: Government spending (G) is less than taxation (T), i.e., G < T. This type of policy is used to reduce aggregate demand and combat inflation.
Studying That Suits You
Use AI to generate personalized quizzes and flashcards to suit your learning preferences.
Description
Test your knowledge on fiscal policy, the prime lever of economic stabilization influencing aggregate demand, economic growth, full employment, and price stability through government spending and taxation manipulation.
