Question:
Which of the following is an example of an expansionary fiscal policy?
(1) An increase in the central bank’s policy interest rate.
(2) A decrease in government spending on infrastructure.
(3) An increase in personal income tax rates.
(4) An increase in government transfer payments.
(5) The sale of government bonds to the public.
Correct Answer:
(4)
Answer Explanation:
Expansionary fiscal policy aims to boost Aggregate Demand. Increasing transfer payments (like grants or welfare) puts more money in people’s hands, increasing consumption and AD. Options 1 and 5 are monetary policy; 2 and 3 are contractionary fiscal policy.
Topic: Fiscal Policy Year: 2024
Leave a Reply