Chapter 7 Government policies!!

Question 1

Fiscal policy

Answer 1

deliberate management of government spending and taxation to influence level of economy to achieve economic goals

Question 2

non-discretionary fiscal policy

Answer 2

automatic fiscal policy via operation of built-in / automatic stabilisers

progressive tax structure
unemployment compensation

Question 3

Multiplier process

Answer 3

Due to multiplier process, increase in AD is more than proportional

Question 4

Crowding out effect

Answer 4

High government spending
high borrowing
high interest rates
low investment

Question 5

Automatic Stabilisers

Answer 5

Economic policies and programs designed to offset
fluctuations in a nation’s economic activity without intervention by govt. on
individual basis.