Question

In referring to ​"the type of fiscal policy changes in​ question," the author recognizes that

a. contractionary fiscal policy is different from expansionary fiscal policy.
b. the tax multiplier is different from the government purchases multiplier.
c. discretionary fiscal policy is different from automatic stabilizers.
d. local government spending changes are different from federal government spending changes.

Answer 1

In referring to ​"the type of fiscal policy changes in​ question," the author recognizes that the tax multiplier is different from the government purchases multiplier. This question is based on information found in the text regarding a Federal Reserve publication. A tax multiplier is negative in value because as taxes decrease, the demand for goods and services will increase.