Part A Decide whether each of the following fiscal policies of the federal government is expansionary or contractionary. Write expansionary or contractionary, and explain the reasons for your choice. 1. The government cuts business and personal income taxes and increases its own spending. Expansionary. The decrease in personal income taxes increases disposable income and thus increases consumption spending. The business tax cut increases investment spending, and the increase in government spending increases government demand. 2. The government increases the personal income tax , Social Security tax and corporate income tax Government spending stays the same 3. Government spending goes up while taxes remain the same. 4. The government reduces the wages of its employees while raising taxes on consumers and businesses Other government spending remains the same Column E: Effect on the National DebtDraw an up arrow if you think the national debt will increase.Draw a down arrow if you think the national t will decrease.米Figure 30.1Effects of Fiscal Policy(A)Objectivefor(C)Action on(D)Effect(E)Effect(B)Actionon theGovernment Federal NationalDebtonAggregateDemandon TaxesSpendingBudget1. National unemployment rate risesto 12 percent.nterest. But lately thereof luck. All that moneyand lending have driecnt borrowers, they mig↑2. Inflation is strong at a rate of 14percent per year.3. Surveys show consumers are losingconfidence in the economy, retailsales are weak and businessTowardinventories are increasing rapidly.deficit4. Business sales and investment areexpanding rapidly, and economiststhink strong inflation lies ahead.5. Inflation persists while unemploy-ment stays high.+ 114%E FocusE E E -Page 2 of 53141503PAGESWtvDOCX

The expansionary fiscal policy i.e. increase in public spending and reduction on taxes are the most…

Answered: Part A Decide whether each of the…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

See similar textbooks

Related questions

Question

Part A Decide whether each of the following fiscal policies of the federal government is expansionary or contractionary. Write expansionary or contractionary, and explain the reasons for your choice. 1. The government cuts business and personal income taxes and increases its own spending. Expansionary. The decrease in personal income taxes increases disposable income and thus increases consumption spending. The business tax cut increases investment spending, and the increase in government spending increases government demand. 2. The government increases the personal income tax , Social Security tax and corporate income tax Government spending stays the same 3. Government spending goes up while taxes remain the same. 4. The government reduces the wages of its employees while raising taxes on consumers and businesses Other government spending remains the same

Column E: Effect on the National Debt
Draw an up arrow if you think the national debt will increase.
Draw a down arrow if you think the national t will decrease.
米
Figure 30.1
Effects of Fiscal Policy
(A)
Objective
for
(C)
Action on
(D)
Effect
(E)
Effect
(B)
Action
on the
Government Federal National
Debt
on
Aggregate
Demand
on Taxes
Spending
Budget
1. National unemployment rate rises
to 12 percent.
nterest. But lately there
of luck. All that money
and lending have driec
nt borrowers, they mig
↑
2. Inflation is strong at a rate of 14
percent per year.
3. Surveys show consumers are losing
confidence in the economy, retail
sales are weak and business
Toward
inventories are increasing rapidly.
deficit
4. Business sales and investment are
expanding rapidly, and economists
think strong inflation lies ahead.
5. Inflation persists while unemploy-
ment stays high.
+ 114%
E Focus
E E E -
Page 2 of 5
3141503
PAGES
W
tv
DOCX

Expert Solution

Trending now

This is a popular solution!

Step by step

Solved in 2 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.

Similar questions