The manipulation of taxes and federal spending in order to stimulate the economy or reduce inflation is known as expansionary or contractionary (one word) policy.

Monetary policy designed to slow down economic activity is called _____ monetary policy.A.expansionaryB.inflationaryC.contractionaryD.deflationary

Contractionary monetary policy:Question 33Select one:a.deals with reduced government spending and/or increased taxes.b.results in increased domestic farm prices, export prices, and input prices.c.deals with increasing government spending and/or decreasing tax rates.d.deals with increasing money supply in the economy and/or decreasing interest rates.e.deals with decreasing money supply in the economy and/or increasing interest rates.

Contractionary fiscal policy deals with: Question 32Select one:a.decreasing money supply in the economy and/or increasing interest rates.b.reducing government spending and/or increasing taxes.c.increasing money supply in the economy and/or decreasing interest rates.d.increasing government spending and/or decreasing tax rates.e.increasing government spending and/or decreasing tax rates.

During a recession, expansionary fiscal policy may involve:  A. Cutting social welfare programs  B. Raising interest rates to control inflation  C. Implementing trade barriers to protect domestic industries  D. Increasing government spending and reducing taxes

When the economy is overheating and experiencing high inflation, contractionary fiscal policy aims to:  A. Increase government spending to boost aggregate demand  B. Reduce taxes to encourage consumer spending  C. Decrease government spending and increase taxes to reduce aggregate demand  D. Lower interest rates to encourage borrowing and investment