If Congress and the president decide an expansionary fiscal policy is necessary, what changes should they make in government spending or taxes? A. In this case, Congress and the president should enact policies that increase government spending and increase taxes. B. In this case, Congress and the president should enact policies that increase government spending and decrease taxes. C. In this case, Congress and the president should enact policies that decrease government spending and decrease taxes. D. In this case, Congress and the president should enact policies that decrease government spending and increase taxes.

Question

Ollie

Business

25 August, 22:13

If Congress and the president decide an expansionary fiscal policy is necessary, what changes should they make in government spending or taxes? A. In this case, Congress and the president should enact policies that increase government spending and increase taxes. B. In this case, Congress and the president should enact policies that increase government spending and decrease taxes. C. In this case, Congress and the president should enact policies that decrease government spending and decrease taxes. D. In this case, Congress and the president should enact policies that decrease government spending and increase taxes.

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Answers (1)

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Eve Ford · Answer 1

The correct option is "B," In this case, Congress and the president should enact policies that increase government spending and decrease taxes.

Explanation:

If Congress and the president decide an expansionary fiscal policy, it is

necessary to inject more money into the economy by increasing government

spending through subsidies to production, aids and grants to businesses/institutions, scholarships and Professorial Chairs in the citadels of learning, embarking on capital and recurrent projects, financing of policies, and programmes of the government, interest-free loans/advances ...

On the other hand, the decrease in every form of taxes in an economy is geared towards generating lesser revenues for the government to finance the aforementioned policies, projects & programmes. In turn, the households and firms will have more money in their hands to spend since the taxes have been reduced. It will make the government raise funds from other sources than from taxes to finance their policies, projects & programmes. Reduced taxes will make the household and the firms to maintain relative liquidity to enable them to carry out and/or expand their new/existing investments. For instance, in Nigeria, the government of President Mohammadu Buhari, has in the current fiscal year decided on expansionary fiscal policy by embarking on Single - Treasury Account to have a pull of all the revenues accruable to the government. It has increased the VAT from 5% to 7.5% to raise more revenues to embark on its various recurrent and capital projects.