We Can Infer That the Government Is Following a Restrictive

question 43

Multiple Choice

We can infer that the government is following a restrictive fiscal policy when

• A)the actual deficit falls.
• B)the natural employment deficit falls.
• C)the actual deficit rises.
• D)the natural employment deficit rises.

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Definitions:

Liquidity

The ease with which an asset can be converted into cash without significantly affecting its price, reflecting the ability of a company or individual to meet immediate and short-term obligations.

Precautionary Motive

The desire to hold cash or other liquid assets to meet unexpected needs and financial emergencies.

Financial Slack

The availability of excess funds or resources in a company that allows for flexibility in operations, strategic investments, or weathering financial uncertainties without immediate financial stress.

Keynes

Refers to John Maynard Keynes, a British economist whose ideas fundamentally changed the theory and practice of macroeconomics and economic policies of governments.