QUESTION 1 Which of the following is considered expansionary fiscal policy? 0 In

Question

QUESTION 1 Which of the following is considered expansionary fiscal policy? 0 Increase in government spending O Increase in taxes 0 Increase in interest rate 0 Increase in money supply QUESTION 2 Which of the following is considered expansionary monetary policy? 0 Increase in government spending o Increase in taxes Increase in interest rate Increase in money supply QUESTION 3 Which of the following is considered contractionary fiscal policy? Increase in government spending Increase in taxes Increase in interest rate unch jsp?course assossment id 300456 1&course; id as

Explanation / Answer

1) The correct choice is : - Increase in government spending

Explanation : - Expansionary fiscal policy occurs when the government attempts to stimulate the economy by decreasing taxes, increasing government spending, and increasing transfer payments.

2) The correct choice is : Increase in money supply

Explanation : - An expansionary monetary policy increases the supply of money. The monetary policies that increase the money supply are open market operations that purchase Treasury bonds in the market, lowering the reserve requirement, and lowering the discount rate.

3) The correct choice is : Increase in taxes

Explanation :- A decrease in government purchases, increase in net taxes, or some combination of the two aimed at reducing aggregate demand enough to return the economy to potential output without worsening inflation.

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