Fiscal policy

a. What is expansionary fiscal policy? What is contractionary fiscal policy?
b. If the government decides that expansionary fiscal policy is necessary, what
changes should it make in government spending or taxes? What changes
should it make if it decides that contractionary fiscal policy is necessary?
a. What is the difference between fiscal policy and monetary policy?
b. What is the difference between federal purchases and federal expenditures? Are
federal expenditures higher today than they were in 1970?

Sample Solution