Section 2

Question 0

Demand-side fiscal policy

Answer 0

Is a plan to stimulate aggregate demand.

Question 1

Keynesian economics

Answer 1

States that aggregate demand needs to be stimulated by government action.

Question 2

Spending multiplier effect

Answer 2

States that a small change in spending causes much larger change in GDP.

Question 3

Supply-side fiscal policy

Answer 3

Provides incentives to producers to increase aggregate supply.

Question 4

Laffer curve

Answer 4

Is a graph that illustrates the economist Arthur Laffer’s theory of how tax cuts affect tax revenues.