BR28.1: Bridge: Fiscal Policy

Which of the following is a common criticism of the use of fiscal policy?

A government borrowing money to finance fiscal policy can crowd out investments.

Which of the following would be an example of expansionary fiscal policy?

A reduction in income taxes on low-income earners.

Appleville is a village that specializes in all forms of apple products. Suppose that each winter, when no apples are being produced, aggregate output falls below the long-run equilibrium output level. What type of fiscal policy might be most effective in correcting this problem?

Increasing government spending in order to increase aggregate demand

Which of the following is not a program managed as part of fiscal policy?

Mortgage rates

Which of the following is an example of an automatic stabilizer?

The amount of tax revenues collected rises when an economy is booming.