No Bull Economics Lessons

Macroeconomics & Microeconomics Concepts You Must Know

AD/AS and Fiscal Policy (6 of 10)

Question 6:
If the economy is struggling with a recession, a suitable fiscal policy would include an increase in:

A.  government spending
B.  purchases of securities by the Fed
C.  taxes
D.  the discount rate
E.  reserve ratio

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Correct Answer: A, government spending. Fiscal policy includes changes in government spending and/or taxes. An increase in government spending is an expansionary policy appropriate during a recession.