Exploring Economics
Exploring Economics
8th Edition
ISBN: 9781544336329
Author: Robert L. Sexton
Publisher: SAGE Publications, Inc
Question
Book Icon
Chapter 24, Problem 1P
To determine

To explain:

The reason for government actions increasing deficits is considered expansionary fiscal policy and government actions decreasing deficits is considered contractionary policy.

Expert Solution & Answer
Check Mark

Explanation of Solution

Fiscal policy is similar to the monetary policy applied by central banks to maintain the flow of cash in the economy. The reason behind the increase in deficit is considered expansionary fiscal policy is thatit expands the money supply in the economy to increase the economic growth by combating the inflation. The expansionary fiscal policy will increase the government spending or reduces the taxes. These steps will lead to shortage of funds and will diminish the surplus.

The fiscal government actions that decrease the deficits are considered as contractionary fiscal policy. This is because a decrease in deficit reduces the money supply, which decreases the demand. This will in turn reduce the purchasing power of consumers as well. The contractionary fiscal policy is that situation when the consumers are left with less amount to spend.

Economics Concept Introduction

Fiscal policy:

That means in economics through which a federal government keeps a check and adjusts its expenditure level and tax rates, or duty charge is referred as fiscal policy. This policy helps to monitor and guide the country's economic situation.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!
Students have asked these similar questions
Wolfgang is a typical producer in a perfectly competitive piano industry (i.e., all other producers of pianos face the same costs as Wolfgang). The following production and cost data apply to the long run as well as the short run. Fixed costs (rent) are unrecoverable in the short run and are equal to $2400 per month. Variable costs consist of raw materials (wire, wood, plastic), which cost $1000 per piano, and the $40 per hour opportunity cost of Wolfgang's time. Wolfgang's production function is given in the table at right. Wolfgang will shut down if the price per piano is less than OA. $3000. B. $4000. O C. $5000. ○ D. None of the above. Pianos (Q) Hours (L) Raw Materials ( 0 0 0 1 100 1000 2 150 2000 3 240 3000 4 400 4000
P2 P₁ $ per unit Using the graph below, determine which statement is TRUE. MC1 SRATC₁ Q1 Q₂ MC2 SRATC2 LRAC ✓ LEA Quantity
Using the grapns below, wnicn snow the snort-run cost curves for 3 perfectly competitive firms in the same industry, determine whether the industry is in long-run equilibrium or not. Q Q Firm A QA MC ATC Output Firm B QB MC ATC Firm C MC ATC Output Output Qc If Firms A, B and C are in the same industry, is this industry in long-run equilibrium? ○ A. Yes, because P = MC = MR for each of the 3 firms. ○ B. No, because Firm A is not producing at a profit-maximizing level of output. ○ C. Yes, because all 3 firms are producing at their minimum average total cost. OD. The answer is uncertain since it's unknown whether the firms are producing at the minimum efficient scale or not. ○ E. No, because if the industry were in equilibrium, all 3 firms would be earning zero economic profits.
Knowledge Booster
Background pattern image
Similar questions
SEE MORE QUESTIONS
Recommended textbooks for you
Text book image
Economics (MindTap Course List)
Economics
ISBN:9781337617383
Author:Roger A. Arnold
Publisher:Cengage Learning
Text book image
Macroeconomics
Economics
ISBN:9781337617390
Author:Roger A. Arnold
Publisher:Cengage Learning
Text book image
MACROECONOMICS FOR TODAY
Economics
ISBN:9781337613057
Author:Tucker
Publisher:CENGAGE L
Text book image
Economics For Today
Economics
ISBN:9781337613040
Author:Tucker
Publisher:Cengage Learning
Text book image
Survey Of Economics
Economics
ISBN:9781337111522
Author:Tucker, Irvin B.
Publisher:Cengage,
Text book image
Exploring Economics
Economics
ISBN:9781544336329
Author:Robert L. Sexton
Publisher:SAGE Publications, Inc