Which of the following is the fiscal policy reaction when a weaker GDP is expected?
A)If government policymakers expect weaker GDP, they proactively increase government expenditure to boost GDP.
B)If the Federal Reserve expects weaker GDP, it will proactively decrease interest rates to boost GDP.
C)If the Federal Reserve expects weaker GDP, it will proactively increase interest rates to boost GDP.
D)If government expenditure rises, then GDP will also rise.

Question

Quizplus · Accepted Answer

When government policymakers expect weaker GDP, they may increase government expenditure through fiscal policy measures such as increasing spending on infrastructure projects or providing tax incentives to businesses to stimulate economic activity and boost GDP. This is known as expansionary fiscal policy. The Federal Reserve's policy tools, such as interest rate changes, fall under monetary policy rather than fiscal policy.

Which of the Following Is the Fiscal Policy Reaction When