Which of the Following Best Describes the Impact of Fiscal

question 20

Multiple Choice

Which of the following best describes the impact of fiscal policy during the Great Depression?

• A) Despite the large increases in government spending as a share of GDP when the New Deal policies were initiated, the expansionary fiscal policy failed to stimulate demand.
• B) Fiscal policy was focused on monetary expansion, when it should have focused on maintaining a balanced budget.
• C) It is difficult to link expansionary fiscal policy with economic recovery because government spending and budget deficits were a relatively small portion of GDP prior to the beginning of World War II.
• D) There is a direct correlation between increases in government spending as a share of GDP and increases in output and employment.

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Definitions:

World Bank

A global financial organization that offers loans and grants to less wealthy nations to help them undertake capital projects.

Developing Nations

Countries with a lower standard of living, underdeveloped industrial base, and low Human Development Index relative to other countries.

Foreign Corrupt Practices Act

A U.S. law that prohibits American companies and their subsidiaries from bribing foreign officials to retain or obtain business.

Fines

Monetary penalties imposed as punishment for breaking laws or regulations.