Practice Questions
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What is the primary purpose of using fiscal policy during a recession, particularly regarding the multiplier effect?
The main goal during a recession is to boost the economy. Other options are incorrect because Some think raising taxes helps the government; It's a co...
According to Keynesian economics, which fiscal policy measure is most effective during an economic recession?
When the economy is struggling, spending more money can help. Other options are incorrect because Some think cutting spending saves money, but it can ...
How does a budget deficit during a recession potentially aid in economic recovery?
When the government spends more money than it earns, it can invest in projects. Other options are incorrect because Some think cutting spending helps ...
How do automatic stabilizers in fiscal policy impact aggregate demand during a recession, and what implications does this have on public debt?
Automatic stabilizers help keep spending steady during a recession. Other options are incorrect because Some might think stabilizers boost demand and ...
In the context of Keynesian economics, how does discretionary fiscal policy, specifically through taxation adjustments, aim to alleviate the effects of a recession?
Decreasing taxes puts more money in people's pockets. Other options are incorrect because Some think raising taxes can help control prices; Keeping ta...
What is the primary purpose of fiscal policy during a recession?
During a recession, people spend less money. Other options are incorrect because Some might think cutting spending and raising taxes will help; Keepin...
What is a primary tool of fiscal policy used by governments to stimulate the economy during a recession?
When the government spends more money, it creates jobs and helps businesses. Other options are incorrect because Some think lowering taxes is the best...
What is a common fiscal policy tool used during a recession to stimulate economic growth?
Increasing government spending helps create jobs and boosts demand. Other options are incorrect because Some think raising taxes helps the economy; Ma...
To combat a recession, the government can implement a fiscal policy action by increasing __________, which aims to shift aggregate demand to the right.
When the government spends more money, it puts cash into the economy. Other options are incorrect because Some think lowering taxes helps, but raising...
How does increasing government spending during a recession specifically impact aggregate demand?
When the government spends more money, it creates jobs. Other options are incorrect because Some think that more government spending raises interest r...
In the context of fiscal policy during a recession, increasing government spending is to stimulating the economy as decreasing taxes is to what?
When taxes go down, people have more money to spend. Other options are incorrect because Some might think lowering taxes means people save less; Peopl...
Which of the following actions can a government take as part of fiscal policy to stimulate the economy during a recession? Select all that apply.
In a recession, the government usually increases spending or cuts taxes to help people spend more money. Other options are incorrect because Spending ...
The Fisherland government is facing a recession with rising unemployment and decreased consumer spending. To combat this downturn, they decide to implement a fiscal policy. Which of the following actions would most effectively stimulate economic activity in this situation?
Increasing government spending on infrastructure projects helps create jobs. Other options are incorrect because Raising taxes can take money away fro...
Which of the following fiscal policy actions is most effective in stimulating economic growth during a recession, and why is it classified as such?
Increasing government spending on projects helps create jobs. Other options are incorrect because The idea is that rich people will invest their tax s...
In a recession, which fiscal policy action is most effective for increasing aggregate demand?
When the government spends more on projects like roads and bridges, it creates jobs. Other options are incorrect because Raising taxes takes money awa...
If a government increases its spending during a recession, what is the primary effect this action aims to achieve?
When the government spends more money, it helps people and businesses buy things. Other options are incorrect because Some might think that spending m...
Arrange the following steps in the correct order for implementing fiscal policy during a recession: A) Increase government spending, B) Analyze economic conditions, C) Decrease taxes, D) Evaluate the effects of the policy.
First, we need to understand the economy by analyzing conditions. Other options are incorrect because This option suggests we lower taxes before spend...
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