FISCAL POLICY WORKSHEET

For each of the situations listed below, decide if you would use expansionary fiscal policy, contractionary fiscal
policy, moral persuasion, or do nothing. You are the P.M and/or Govt. and you need to use your Fiscal Powers
to assist the economy.

1. If you use expansionary fiscal policy you are trying to grow the economy and create more jobs by
lowering taxes and increasing govt. spending.
2. If you use contractionary fiscal policy you are trying to slow the economy down in order to fight
inflation or prevent the economy from over heating and collapsing. 

3. Moral persuasion can be used by the P.M and Members of Parliament when they go on television and
simply encourage people to either save more or spend less. 

4. Doing nothing = the economy is doing well, so we will do nothing. Or, the issue appears to be short
term.

Reminder:

1. Expansion: Grow Economy, Create jobs = Lower Taxes, Increase Gov’t Spending
2. Contraction: Slow Economy, fight Inflation and increasing prices = Higher Taxes, Lower Gov’t Spending

Questions:

1.  Stock prices have declined for the last two weeks.   

2.  GDP dipped from 5 percent to 2 percent in this year. 

3.  The Consumer Price Index (CPI)/Inflation has risen by 3 percent in the last six months.

4.  Commercial interest rates are rising, but the Federal Reserve Bank has not raised rates. 

5.  The prices of sanitizers and masks have tripled in this month. 

6.  GDP is growing steadily, and prices are rising sharply. 

7.  The United States is experiencing both high inflation and high unemployment. 

8.  The CPI is up, and housing rates starts are at a fifteen-year high.

9.  We are in a recession.  Factory orders are down, and the economy appears to be slumping. 

10.  Consumers feel worried, inflation is low and spending is sluggish. 

11.  Unemployment is low and prices are rising steadily. 

12.  The index of leading economic indicators shows a strong move towards inflation. 

13.  The FED senses that people are not saving money. 

14.  Jobless rates are pushing 11 percent while the CPI has fallen from 8 percent to 2 percent growth. 
15.  Prices are stable, and the GDP is growing at a 3 percent pace.

16. India and entire world facing the worst crisis ever now in 2020.