Fiscal Policy Application
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by Stephanie Foy
| 5 Questions
1
1
If the federal government decides to raise taxes and reduce government spending, they are most likely trying to achieve which of the folloiwng?
an increase in aggregate demand and a decrease in real GDP
a dcrease in aggregate demand and an increase in real GDP
a decrease in aggregate demand and real GDP
an increase in aggregate demand and real GDP.
2
1
Examine the image above. Assume that the federal government's fiscal policies led to the results shown in the image above wher AD0 shifts right to AD1.

Select the TWO actions that could have caused the impact above.
Reducing income taxes
Raising income taxes
Raising government expenditures
Reducing government expenditures
3
1
The primary goal of contractionary fiscal policy is to
increase aggregate supply
reduce unemployment
increase real GDP
reduce price levels
4
1
Tax revenue is $2.3 trillion in a country for 2018-2019.
Government expenditures in the country are $2.7 trillion.

Which of the following statements is true?
The country has a budget surplus and will have $.4 trillion left in the treasury.
The country has a balanced budget.
The country has a budget deficit and will need to borrow $.4 trillion.
The country is running contractionary fiscal policy.
5
1
Expansionary fiscal policy is created by reducing taxes or increasing government spending.

Which of the following is a downside of expansionary fiscal policy?
an increase in the national debt.
an undesirable budget surplus.
the reduction of government services.
a reduction in interest rates.
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