AT3 Practice

To maximize government spending

To maintain inflation at 5–6%

To stabilize the currency, achieve full employment and economic growth

To reduce government debt

Lowering the interest rate to increase AD

Increasing the cash rate to reduce inflation

Increasing government spending

Cutting taxes to boost private investment

Money supply increases

Interest rates fall

Cash rate decreases

Money supply decreases

Corporate profits

Private investments

Capital expenditure

Monetary transfers by commercial banks

Revenues > Expenditures

Expenditures = Revenues

Expenditures > Revenues

Taxes are cut and interest rates are raised

Increase interest rates to attract foreign capital

Reduce income taxes to encourage household spending

Cut welfare programs to reduce fiscal deficit

Introduce new environmental regulations to reduce business activity

Inflation is at 6%, and GDP growth is high

Unemployment is rising and consumption is falling

Exchange rate is depreciating rapidly

Budget deficit is increasing due to high government spending

Increased national debt

Rising inflation due to spending

Withdrawal of money from the economy, slowing growth

Higher transfer payments to low-income earners