The Principle Underlying Fiscal Policy States That When Unemployment Is

question 32

Multiple Choice

The principle underlying fiscal policy states that when unemployment is rising and the economy is going into a recession, fiscal policy should:

• A) stimulate economic activity by decreasing taxes.
• B) curb economic activity by reducing government spending.
• C) let the forces of supply and demand operate on their own.
• D) employ a tight-money policy.
• E) reduce the rate of growth in the amount of money in circulation.

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Definitions:

Federal Reserve System

The central banking system of the United States, responsible for monetary policy, regulating banks, and ensuring financial system stability.

Securities and Exchange Commission

A U.S. federal agency responsible for enforcing the laws governing the securities industry, and regulating the securities markets and investment companies.

Rate of Return

The advancement or decline in an investment's value over a predetermined interval, calculated as a percentage of the investment's initial expenditure.

Specialists

Market professionals on a stock exchange who are responsible for managing the trading of specific stocks, ensuring liquidity and fair pricing.