Questions: Which of the following is an example of counter-cyclical government policy? Select one: a. Congress raising income tax during recession b. The President raising spending on education during an expansion c. The Fed raising the Federal funds rate during a recession when unemployment is high d. The Fed buying government bonds during a strong expansion e. Congress raising corporate taxes during an expansion

The answer is e. Congress raising corporate taxes during an expansion

This is not an example of counter-cyclical policy. Counter-cyclical policies are designed to counteract the economic cycle. Raising income taxes during a recession would likely exacerbate the downturn by reducing disposable income and consumer spending.

Increasing spending during an expansion is not typically counter-cyclical. Counter-cyclical fiscal policy would involve reducing spending during an expansion to prevent the economy from overheating.

This is pro-cyclical rather than counter-cyclical. Raising interest rates during a recession would likely slow down economic activity further, which is contrary to the goals of counter-cyclical policy.

This action is typically part of an expansionary monetary policy, which is not counter-cyclical during an expansion. During a strong expansion, the Fed would usually sell bonds to reduce money supply and control inflation.

This is an example of counter-cyclical policy. By raising corporate taxes during an expansion, the government can help cool down the economy, prevent overheating, and potentially reduce inflationary pressures.