Question
11) Which of the following is an example of expansionary fiscal policy? (A) An Increase in the money supply to decrease interest rates A decrease in the money supply by an increase in the reserve requirement (C) An increase in the government purchase of bonds (D) A decrease in personal income tax rates (B) A decrease in government expenditures on public works programs
Solution
4.1
(276 Votos)
Liz
Elite · Tutor por 8 anos
Resposta
The correct answer is (D). A decrease in personal income tax rates is an example of expansionary fiscal policy.
Explicação
## Step 1Expansionary fiscal policy is a macroeconomic strategy that involves increasing government spending, decreasing taxes, or both to stimulate economic growth. This policy is typically used when the economy is in a recession or when there is a need to stimulate economic activity.## Step 2Option (A) involves an increase in the money supply to decrease interest rates. This is an example of monetary policy, not fiscal policy. Monetary policy is controlled by the central bank and involves the management of interest rates and the money supply.## Step 3Option (B) involves a decrease in the money supply by an increase in the reserve requirement. This is also an example of monetary policy, not fiscal policy.## Step 4Option (C) involves an increase in the government purchase of bonds. This is an example of open market operations, which is a tool of monetary policy, not fiscal policy.## Step 5Option (D) involves a decrease in personal income tax rates. This is an example of expansionary fiscal policy. By decreasing taxes, the government is increasing the disposable income of individuals, which can stimulate consumer spending and economic activity.## Step 6Option (E) involves a decrease in government expenditures on public works programs. This is an example of contractionary fiscal policy, not expansionary. Contractionary fiscal policy is used to slow down the economy when it is growing too fast.