When the Australian economy hits a recession, fiscal policy:Question 1Select one:A.Automatically becomes expansionary because average tax rates go down and spending on welfare programs goes up.B.Is always discretionary because the government is quick to react to changes in the business cycle.C.Automatically becomes contractionary because average tax rates go up and spending on welfare programs goes down.D.Automatically becomes contractionary because average tax rates go down and spending on welfare programs goes up.

When the economy is overheating and experiencing high inflation, contractionary fiscal policy aims to:  A. Increase government spending to boost aggregate demand  B. Reduce taxes to encourage consumer spending  C. Decrease government spending and increase taxes to reduce aggregate demand  D. Lower interest rates to encourage borrowing and investment

During a recession, expansionary fiscal policy may involve:  A. Cutting social welfare programs  B. Raising interest rates to control inflation  C. Implementing trade barriers to protect domestic industries  D. Increasing government spending and reducing taxes

Contractionary fiscal policy deals with: Question 32Select one:a.decreasing money supply in the economy and/or increasing interest rates.b.reducing government spending and/or increasing taxes.c.increasing money supply in the economy and/or decreasing interest rates.d.increasing government spending and/or decreasing tax rates.e.increasing government spending and/or decreasing tax rates.

Which of the following is an example of discretionary fiscal policy? Government builds more hospitals as the population ages. An increase in total unemployment benefit payments during a recession due to rising unemployment. An increase in corporate tax collection during an expansion because of more sales. A decrease in total unemployment benefit payments during expansion due to increasing employment. An increase in the interest rate.

If expansionary fiscal policy is followed by contractionary monetary policy, nominal interest rate and employment would most likely be affected in which of the following ways in the short-run?