Question

The Phillips Curve suggests that, if government uses an expansionary fiscal policy to stimulate output and employment: A) unemployment may actually increase because of the crowding-out effect. B) tax revenues may increase even though tax rates have been reduced. C) inflation may result. D) the natural rate of unemployment may fall.

Answer 1

The Phillips Curve suggests that, if government uses an expansionary fiscal policy to stimulate output and employment:  inflation may result.

What are the fiscal policies?

• The use of taxation and expenditure by the government to affect the economy is known as fiscal policy. Fiscal policy is often used by governments to encourage robust, long-term growth and to lower poverty.
• Fiscal policy is the use of government income collection and expenditure to affect a nation's economy in economics and political science.
• Three different forms of fiscal policy exist. These three types of policy are neutral, expansionary, and contractionary.
• These include spending on welfare, taxes, and subsidies. Fiscal policies are also influenced by specific investment and disinvestment practices as well as debt and surplus management.
• The federal government's tax and spending policies are referred to as fiscal policy. The Fed has little influence over fiscal policy decisions; instead, the Congress and the Administration make them.

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