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Units 12 13 Fixing An Economy Fiscal And Monetary Policy Worksheet Answers
Get Units 12 13 Fixing An Economy Fiscal And Monetary Policy Worksheet Answers
DUE DATE: NAME: UNITS 1213: FIXING AN ECONOMY: FISCAL & MONETARY POLICY WORKSHEET USE THE LECTURE NOTES TO ANSWER THE FOLLOWING QUESTIONS (10 pts each)1. John Keynes suggested that government should.
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Fiscal policy worksheet answer key FAQ
During times of inflation, by raising taxes or decreasing government spending, fiscal policy attempts to decrease consumer spending and business investment, which should lead to a decrease in aggregate demand and a decrease in real GDP, the price level, and employment. This is called contractionary fiscal policy.
Expansionary fiscal policy occurs when the Congress acts to cut tax rates or increase government spending, shifting the aggregate demand curve to the right. Contractionary fiscal policy occurs when Congress raises tax rates or cuts government spending, shifting aggregate demand to the left.
In the short term, governments may focus on macroeconomic stabilization—for example, expanding spending or cutting taxes to stimulate an ailing economy, or slashing spending or raising taxes to combat rising inflation or to help reduce external vulnerabilities.
Monetary policy refers to the actions of central banks to achieve macroeconomic policy objectives such as price stability, full employment, and stable economic growth. Fiscal policy refers to the tax and spending policies of the federal government.
The three major goals of fiscal policy and signs of a healthy economy include inflation rate, full employment and economic growth as measured by the gross domestic product (GDP).
What is the difference between fiscal and monetary policy? Fiscal policy is when the government changes taxes on government expenditures to influence the level of economic activity. Monetary policy is when the Federal reserve bank attempts to influence the money supply in order to stabilize the economy.
Increasing taxes, which reduce an individual's spending power, can help ease inflation. As the St. Louis Fed notes, through taxation, “the government can have some influence over the total level of spending by consumers.”
Fiscal policy has a stabilizing effect on an economy if the budget balance—the difference between expenditure and revenue—increases when output rises and decreases when it falls.
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