[Jan] Procyclical Fiscal Policy & Countercyclical Fiscal Policy

Question 1

What is Procyclical Fiscal Policy?

Answer 1

This fiscal policy goes in line with the current mood of the business cycle; amplifying them.

Question 2

If their is boom in market,what will be done under Procyclical Fiscal Policy?

Answer 2

total government spending as a percentage of GDP goes up and tax rates go down, increasing government deficit..

Question 3

If their is recession in market,what will be done under Procyclical Fiscal Policy?

Answer 3

total government spending as a percentage of GDP goes down and tax rates go up, decreasing government deficit.

Question 4

Effects of procyclical fiscal policy?

Answer 4

Such a policy is dangerous and undesirable as it brings instability in the economy.

Question 5

If their is boom in market,what will be done under Countercyclical Fiscal Policy?

Answer 5

Increasing taxes and reducing public expenditure. This will help to slow down the demand and thus keeping inflation under control.

Question 6

If their is recession in market,what will be done under Countercyclical Fiscal Policy?

Answer 6

Reducing taxes and increasing expenditure will help to create demand and producing upswing in the economy.

Question 7

Effects of Countercyclical Fiscal Policy?

Answer 7

works against the ongoing boom or recession trend; thus, trying to stabilize the economy.

Question 8

What is Countercyclical Fiscal Policy?

Answer 8

refers to strategy by the government to counter boom or recession through fiscal measures.