Wednesday, August 5, 2009

Which of the following is a goal of expansionary fiscal policies?

A. Reduce inflation



B. Decrease the rate of economic growth



C. Lower the rate of unemployment



D. Reduce the budget deficit



please explain.



Which of the following is a goal of expansionary fiscal policies?





C.



Expansionary fiscal policy is used if you%26#039;re in a recession or a depression. During a recession or depression, you have high unemployment and falling real GDP. An expansionary fiscal policy is when you increase government spending or cut taxes to increase aggregate expenditures. This also increase aggregate demand, and real GDP rises. As GDP rises, firms need more people to produce the increased output, so they hire more people.



A, B, and D, would be goals of contractionary fiscal policy.

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