Expansionary fiscal policy [select three] is more suitable in a situation where

Question

Expansionary fiscal policy [select three] is more suitable in a situation where actual GDP is greater than potential GDP. is more suitable in a situation where actual GDP is less than potential GDP. combats inflation combats unemployment includes cutting SG and/or raising t includes cutting t and/or raising $G Contractionary fiscal policy....[please choose two responses] is a suitable response to a situation where actual GDP is less than potential GDP is a suitable response to a situation where actual GDP is greater than Potential GDP results in reduced aggregate demand involves lower government spending and/or lower tax rates requires reducing the money supply involves higher government spending and/or lower tax rates

Explanation / Answer

Expansionary fiscal policy -

is more suitable in a situation where actual GDP is less than the potential GDP,combats inflation and includes cutting t and/or raising $G.

Expansionary fiscal policy is used to expand the slow economy by cutting tax rates and increasing government expenditures.

4. Contractionary fiscal policy -

is a suitable response to a situation where actual GDP is greater than potential GDP and results in reduced aggregate demand.

Contractionary fiscal policy is implemented during economic boom inorder to contract the economy by cutting down government expenditure and raising tax rates.

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