QUESTION 707. What factors make an expansionary "stimulus" fiscal policy effective? a) A government budget deficit associated with fiscal stimulus should should borrow money from those who spend less and save more, to those who spend more and save less. b) A permanent decrease in taxes is more effective in stimulating spending than a temporary one c) An increase in government purchases of goods and services should be temporary and should not permanently displace private spending d) The most expansionary way of financing the budget deficit associated with a fiscal stimulus policy is by the central bank expanding the quantity of money in circulation. e) Infrastructure investment belongs with long-term growth policy, but invariably makes a poor element in stimulus policy because such investment normally take a long time to implement. f) All the above.

Fiscal stimulus can raise output and incomes in the short run. To have the greatest impact with the…

Answered: 07. What factors make an expansionary…

Economics (MindTap Course List)

13th Edition

ISBN:9781337617383

Author:Roger A. Arnold

Publisher:Roger A. Arnold

Chapter18: Debates In Macroeconomics Over The Role And Effects Of Government

Section18.10: Demand-side And Supply Side Views Of The Economy And Government Tools For The Changing Real Gdp

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QUESTION 7

07. What factors make an expansionary "stimulus" fiscal policy effective?

		a) A government budget deficit associated with fiscal stimulus should should borrow money from those who spend less and save more, to those who spend more and save less.
		b) A permanent decrease in taxes is more effective in stimulating spending than a temporary one
		c) An increase in government purchases of goods and services should be temporary and should not permanently displace private spending
		d) The most expansionary way of financing the budget deficit associated with a fiscal stimulus policy is by the central bank expanding the quantity of money in circulation.
		e) Infrastructure investment belongs with long-term growth policy, but invariably makes a poor element in stimulus policy because such investment normally take a long time to implement.
		f) All the above.

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