Topic 3:

Question 1

Fiscal Policy:

Answer 1

Reflects to the government spending and taxation to influence the economic activity.

Question 2

Expansionary fiscal policy:

Answer 2

Stimulates the economy during or in anticipation of a business-cycle connotation.

Question 3

Contractionary fiscal policy:

Answer 3

The government reduces spendings, increases taxes or does both.

Question 4

True sentences:

Answer 4

1) Confidence and liquidity are the key elements of stable economy. 2) 6 months is considered short term. 3) Keynes’s theory refers to recession and inflammatory gaps. 4) The measures proposed by Keynes’s are more effective during recession.

Question 5

Monetary policy:

Answer 5

Lowering interest rates to encourage investment and borrowing.

Question 6

What is the intention behind lowering taxes?

Answer 6

It is to increase disposable income to boost consumption and stimulate the economy.

Question 7

What is the intention behind increasing Government Spending?

Answer 7

It is to create more job opportunities, increase demand and to stimulate economic growth during recession.