Question

Identify all of the statements that are examples of fiscal policy. There is an increase in income tax rates. The Federal Reserve purchases bonds on the open market. The estate tax is repealed. Government increases military spending. Public money is used to build a high-speed train that connects Los Angeles and Las Vegas. The Federal Reserve increases the money supply by decreasing the reserve ratio requirement. To help domestic firms, government sets a quota on the number of goods that can be imported.

Answer 1

Answer:

1. There is an increase in income tax rates.

2. The estate tax is repealed.

3. Government increases military spending.

4. Public money is used to build a high-speed train that connects Los Angeles and Las Vegas.

Explanation:

Fiscal policy in economics refers to the use of government revenues (tax policies) and expenditures to influence micro and macroeconomic conditions, such as inflation, economic growth, employment, and aggregate demand (AD) for goods and services in a country.

Basically, fiscal policy involves the use of taxation and government expenditures to influence the aggregate demand in a country's economy.

It was formulated based on the ideas of John M. Keynes, who was a British economist. Keynes argued that by adjusting expenditure level and tax policies, the government could create stability in businesses and regulate economic output, so as to shore up the private sector.