How does expansionary monetary policy increase spending in the economy compared to how expansionary fiscal policy increases spending in the economy?
The problem typically during a recession is not that there is too little money, but too little spending. If the problem was too little money, what would be its cause? If the problem was too little spending, what could be its cause?
Consider the following statement, "The Federal Reserve fights recessions by increasing the money supply so people will have more money to spend." What is wrong with the statement and how can it be corrected?
Identify each of the following as (i) part of an expansionary fiscal policy, (ii) part of a contractionary fiscal policy, or (iii) not part of fiscal policy.
a. The personal income tax rate is lowered.
b. Congress cuts spending on defense.
c. College students are allowed to deduct tuition costs from their federal income taxes.
d. The corporate income tax rate is lowered.
e. The state of Nevada builds a new tollway in an attempt to expand employment and ease traffic in Las Vegas.