Describe three fiscal policy options for the Federal government that are (I) con

Question

Describe three fiscal policy options for the Federal government that are (I) contractionary and (II) expansionary.(Use the appropriate space)

(I) Contractionary Policy

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(II) Expansionary Policy

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______________________________

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(B) When would the federal government involve each of these two kinds of policy and what would be their effects on the federal budget?

C)

© List and briefly describe at least three problems and/or criticisms associated with implementing fiscal policy.

Explanation / Answer

The stabilise the economy from Inflation and Deflation is the core function of the Government in order to achieve this objective government uses thse two policies, Fiscal and Monetary policy.

Fiscal policy refers to Government revenue, expenditure, policy on economic activities this policy divided in following the ways

Contractionary policy- this policy generally adopted by the Government when the economy faces the high inflationary situation in order to solve this problem government may reduce its expenditure, rise the taxation, presents the surplus budget.The main aim is to reduce excessive aggregate demand.

Expansionary policy- this often used during recession period, where aggregate demand in the economy is low lowering taxation, increasing Government expenditure through deficit budget can solve the deficiency of aggregate demand in the economy

The problem of implementing these policies

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