Fiscal Policy

What is considered healthy economic growth for fiscal policy in terms of percent of Gross Domestic Product (GDP) per year?

2% to 3%

The economy is doing well but prices for goods and services are increasing at a faster pace. Determine the course of action that could be taken to help the economy.

A contractionary fiscal policy involving increases in individual and corporate tax rates as well as cuts to subsidies and the number of government employees would help to slow inflation.

Which statement explains why contractionary fiscal policy is often not used by the federal government?

Individual and corporate tax rates increase while spending for social programs decreases, both of which would lead the economy to slow down or contract.

What impact does an expansionary fiscal policy action, such as a tax cut, generally have on consumer and business spending?

Spending increases for both businesses and consumers

How does the federal government's fiscal policy affect the U.S. economy?

The federal government implements tax and spending measures that affect employment, economic growth, and inflation.