Macro - Policies

Question 1

Expansionary Fiscal Policy

Answer 1

Reduce unemployment and increase GDP (close a recession)
Increase Gov spending
Decrease taxes (increase income)

Question 2

Contractionary Fiscal Policy

Answer 2

Reduce inflation, decrease rGDP (close inflationary gap)
Decrease gov spending
Increase taxes

Question 3

Marginal Propensity to Consume

Answer 3

How much people consume rather than save when there is a change in income

Question 4

Marginal propensity to save

Answer 4

How much people save rather than consume when there is a change in income

Question 5

Budget Deficit

Answer 5

when the government’s expenditure exceeds revenue

Question 6

Reserve Requirement

Answer 6

Percent of deposits that banks must hold in reserve (% they CANNOT loan)