Answer to Question #133201 in Macroeconomics for Melissa

Question

Q.1.5 Which one of the following statements regarding fiscal policy and the budget is

correct?

(a) When the government plans to stimulate economic activity, it can increase spending or reduce taxes;

(b) Revenue from tax is always greater than government spending in South Africa;

(c) Demand management only refers to fiscal policy;

(d) A contractionary fiscal policy should be implemented to combat unemployment.

Answer 1

(a) When the government plans to stimulate economic activity, it can increase spending or reduce taxes.