Author Question: Does expansionary fiscal policy directly increase the money supply? Isn't it true that the president ... (Read 83 times)

nmorano1 · **on:** Jun 29, 2018

Does expansionary fiscal policy directly increase the money supply? Isn't it true that the president and Congress fight recessions by spending more money?

What will be an ideal response?

Question 2

The Fed uses a core price index, one that excludes food and energy prices to measure inflation. It does so because

A) food and energy have inelastic demand curves and consumers will buy them regardless of their price.
B) food and energy prices have wide swings that are not related to the causes of general inflation.
C) food and energy prices do not change all that much during the short run, so are irrelevant to the calculation of inflation.
D) it wants to avoid the blame for high gasoline prices causing inflation.

kaylee05 · **Reply #1 on:** Jun 29, 2018

Answer to Question 1

No, expansionary fiscal policy does not directly increase the money supply. The president and the Congress fight recessions by increasing spending, not the money supply, by either increasing government spending or cutting taxes to increase household disposable income and, therefore, consumption spending.

Answer to Question 2

B