Economics · Macroeconomic Policy & Foreign Trade
During a recessionary phase, governments typically adopt a specific fiscal stance to revive demand. While this approach increases national income through the multiplier effect, it can stimulate import demand. Furthermore, economic paradigms offer contrasting views on the state's role. Which option correctly identifies the fiscal policy associated with recessionary conditions, its typical impact on the current account balance, and the state's role according to the classical economic perspective?
- 1Surplus budget policy; Worsens the current account balance; Passive (markets self-correct)
- 2Expansionary (Reflationary) policy; Improves the current account balance; Active (fiscal intervention necessary)
- 3Contractionary (Deflationary) policy; Improves the current account balance; Active (fiscal intervention necessary)
- 4Expansionary (Reflationary) policy; Worsens the current account balance; Passive (markets self-correct)✓
Correct answer
Expansionary (Reflationary) policy; Worsens the current account balance; Passive (markets self-correct)
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