Question

The In the News article in the text titled "Fiscal Policy in the Great Depressien" discusses fiscal spending and taxation. During the Great Depression, the federal govemment pursued a policy of fiscal restraint that led to A decrease of the federal deficit. O The retirement of bonds, which reduced the federal debt O An increase in aggregate supply O A decrease in aggregate demand

Answer 1

A.)) A decrease of the federal deficit.

This can also be framed as structural deficit.

Structural Deficit is defined as the amount by which a government’s spending is more than it receives in taxes in a particular period, whether the economy is performing well or not.

This part of the fiscal deficit will not disappear when the economy recovers. A structural factor might be the long-term effects of an ageing population or perhaps the underlying level of personal and corporate tax avoidance.

The government is pursuing restrictive fiscal policy then structural deficit decreases.

Fiscal policy includes any policy that influences or changes taxes, transfer payments (Unemployment insurance, etc.), and expenditures.