Assume the economy is operating below full employment. Which of the following policy actions will allow aggregate spending to increase but will not increase the size of the government in the process?
A. Increase government spending and leave tax rates unchanged.
B. Decrease government spending by more than an increase in taxes.
C. Decrease tax rates and leave government spending unchanged.
D. Increase government spending and taxes by the same amount.
Answer: C
You might also like to view...
Voters who do not have single-peaked preferences _____
a. prefer outcomes closer to their most preferred outcome to outcomes further away b. do not necessarily prefer outcomes closer to their most preferred outcome to outcomes farther away c. prefer all outcomes the same d. are unable to weigh one outcome against another outcome, regardless of where the outcome is along a one-dimensional continuum
Which of the following occurs when a shortage occurs in the market for a good?
a. Quantity demanded exceeds quantity supplied and the market mechanism pushes the price up, which in turn encourages more production and less consumption. b. Quantity supplied exceeds quantity demanded and the price falls, which encourages more production and less consumption. c. Quantity demanded exceeds quantity supplied and the market mechanism pushes the price down, which encourages more production and less consumption. d. Quantity supplied exceeds quantity demanded and the price rises, which encourages more production and less consumption.