Check all of the following that apply to fiscal policy. Assumption is that the e
ID: 1203776 • Letter: C
Question
Check all of the following that apply to fiscal policy. Assumption is that the economy self-corrects advocates expansionary policies in recessions advocates for contractionary policies in overheated economies sometimes can lead to a larger budget defic it Check each of the following that apply to the Classical theory. Became popular in America in 1776 had renewed popularity during the 1930s inflexible wages, interest rates, and prices savings doesn't necessarily equal investment need government to increase AD has sticky wages The AD curve slopes downward due to the (check all that apply.) substitution effect income effect interactional effect interest Cole effectExplanation / Answer
Q35:
The correct option is – option 2.
With the help of fiscal policy, a government adjusts its spending levels and tax rates in order to monitor and influence a nation's economy.
Expansionary fiscal policy is also known as reflationary fiscal policy. Under this policy, the government spending exceeds tax revenue, and it is usually undertaken during recessions
Q36:
The correct option is – option 1.
The classical theory began in 1776. The assumptions of classical theory include:
Q37:
The reasons for downward sloping AD curve include:
Consumers are likely to have higher disposable income at a lower price level. Therefore, they spend more at this level.
At a lower price level, goods will become relatively more competitive. This in turn will lead to higher exports. Exports are a component of AD so AD will be higher.
Interest rates usually fall at a lower price level. As a result, there is an increase in the aggregate demand.