How might fiscal policy be used to correct an inflationary gap?
A. The exchange rate would be adjusted to discourage imports.
B. The exchange rate would be adjusted to encourage imports.
C. Government spending would be adjusted to reduce consumer spending.
D. Business operations would be regulated by the government to become more efficient.
Answer: C
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If the U.S. government increased its holdings of British pounds, definitely
A) the capital and financial account would increase. B) the capital and financial account would decrease. C) there would be an increase in U.S. official reserves. D) there would be a decrease in U.S. official reserves.
For a given real interest rate, an increase in inflation makes the after-tax real interest rate
a. decrease, which encourages savings. b. decrease, which discourages savings. c. increase, which encourages savings. d. increase, which discourages savings.