Suppose the economy had been producing at potential output but is now producing above it. Which of the following are discretionary fiscal policies that could bring the economy closer to potential output? Check all that apply. Additional spending on bridge repairs A reduction in spending on new road construction A tax cut A tax increase In the preceding scenario, is the discretionary fiscal policy needed to bring the economy closer to potential output an example of expansionary fiscal policy or contractionary fiscal policy? O Expansionary O Contractionary
Suppose the economy had been producing at potential output but is now producing above it. Which of the following are discretionary fiscal policies that could bring the economy closer to potential output? Check all that apply. Additional spending on bridge repairs A reduction in spending on new road construction A tax cut A tax increase In the preceding scenario, is the discretionary fiscal policy needed to bring the economy closer to potential output an example of expansionary fiscal policy or contractionary fiscal policy? O Expansionary O Contractionary
Chapter24: Fiscal Policy
Section: Chapter Questions
Problem 5P
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