How does the government typically change fiscal policy to try to keep the economy stable during a period of rapid economic growth?A.Lowering taxes on businesses and individualsB.Increasing the amount of money in circulationC.Decreasing the amount of money in circulationD.Increasing taxes on businesses and individualsSUBMITarrow_backPREVIOUS
Question
How does the government typically change fiscal policy to try to keep the economy stable during a period of rapid economic growth?A.Lowering taxes on businesses and individualsB.Increasing the amount of money in circulationC.Decreasing the amount of money in circulationD.Increasing taxes on businesses and individualsSUBMITarrow_backPREVIOUS
Solution
During a period of rapid economic growth, the government typically changes fiscal policy by increasing taxes on businesses and individuals (Option D). This is done to slow down the economy and prevent it from overheating, which can lead to inflation. By increasing taxes, the government reduces the amount of disposable income available to consumers, which can decrease consumer spending and slow economic growth. This is a part of contractionary fiscal policy.
Similar Questions
How does the government typically change fiscal policy to try to improve the U.S. economy during a recession?A.By decreasing the amount of money in circulationB.By increasing taxes on businesses and individualsC.By increasing the amount of money in circulationD.By lowering taxes on businesses and individualsSUBMITarrow_backPREVIOUS
Fiscal policy helps the government manage the economy by:A.setting the level of unemployment for the year.B.spending tax money during difficult economic times.C.setting environmental regulations for businesses.D.deciding on the proper money supply in the country.
How does the government use fiscal policy to influence the economy?Multiple choice question.By changing interest ratesBy printing or destroying moneyBy creating new businessesBy controlling taxation and its own spending
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
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
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