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1. During which of the following situations would the government most likely have a
contractionary fiscal policy?
A. when the volume of net exports is unusually low
B. when the economy is in a trough of the business cycle
C. when the inflation rate is negative
D. when the level of economic output is running unusually high
E. when the unemployment rate is running unusually high

2. During a recession, unemployment will ________, tax revenue collected by the
government will ________, and spending by the government will ________.
A. decrease; decrease; decrease
B. increase; increase; decrease
C. decrease; decrease; increase
D. increase; decrease; increase
E. decrease; increase; decrease

3. According to the new classical critique of fiscal policy, why do consumers increase their
savings in response to government spending?
A. They shift their consumption toward more expensive goods, which must be saved up
for.
B. Government spending incentivizes firms to lower prices, which means consumers
spend less.
C. Government spending drives interest rates up and so makes saving more profitable.
D. When workers’ earnings increase, they are able to save a greater percentage of their
total earnings.
E. They believe they will eventually need the saved money when they have to pay
higher taxes.

Sagot :

A situation when the government most likely have a contractionary fiscal policy is D. when the level of economic output is running unusually high.

What is contractionary fiscal policy?

Contractionary fiscal policy is when the government collects more money than it spends. This is usually done by increasing taxes and reducing government expenditure.

During a recession, unemployment will increase tax revenue collected by the government will decrease, and spending by the government will increase.

According to the new classical critique of fiscal policy, consumers increase their savings in response to government spending because they believe they will eventually need the saved money when they have to pay higher taxes.

Learn more about fiscal policy on:

https://brainly.com/question/6583917

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