Question

If Congress and the president decide an expansionary fiscal policy is​ necessary, what changes should they make in government spending or​ taxes? A. In this​ case, Congress and the president should enact policies that decrease government spending and increase taxes. B. In this​ case, Congress and the president should enact policies that increase government spending and decrease taxes. C. In this​ case, Congress and the president should enact policies that increase government spending and increase taxes. D. In this​ case, Congress and the president should enact policies that decrease government spending and decrease taxes. What changes should they make if they decide a contractionary fiscal policy is​ necessary? A. In this​ case, Congress and the president should enact policies that decrease government spending and decrease taxes. B. In this​ case, Congress and the president should enact policies that decrease government spending and increase taxes. C. In this​ case, Congress and the president should enact policies that increase government spending and decrease taxes. D. In this​ case, Congress and the president should enact policies that increase government spending and increase taxes.

Answer 1

1. If Congress and the president decide an expansionary fiscal policy is​ necessary, what changes should they make in government spending or​ taxes?

B. In this​ case, Congress and the president should enact policies that increase government spending and decrease taxes.

2. What changes should they make if they decide a contractionary fiscal policy is​ necessary?

B. In this​ case, Congress and the president should enact policies that decrease government spending and increase taxes.

Step-by-step explanation:

Fiscal policy is the government’s approach to taxing and spending in order to influence and balance the economy for the mid or long term. There are mainly two types of fiscal policies that governments use: the Expansionary Fiscal Policy and the Contractionary Fiscal Policy.

The Expansionary Fiscal Policy aims to stimulate economic growth by enacting policies that increase government spending and decrease taxes (Option B, Question 1) and it is often used when a nation has a high unemployment rate and a low demand rate.

The Contractionary Fiscal Policy, on the other hand, aims to stimulate economic growth by enacting policies that decrease government spending and increase taxes (Option B, Question 2), and it is normally used when a nation has a high inflation rate.