If inflation is a major issue in the economy, what would be the correct fiscal policy response from an economic perspective? Why would members of Congress be unlikely to support such actions?
If inflation is the major issue, the correct fiscal policy response would be to increase taxes, decrease government purchases, and/or decrease transfer payments in order to reduce aggregate demand putting downward pressure on prices. However, these actions would not be popular with voters making elected officials unlikely to support them.
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A rise in the minimum wage increases the demand for union labor because this policy change
A) lowers the wage rate paid to union labor. B) raises the productivity of union labor. C) lowers the cost of a substitute for union labor. D) raises the cost of a substitute for union labor.
Refer to Figure 2-8. What is the opportunity cost of producing 1 ton of coconuts in Guatemala?
A) 1/2 of a ton of pineapples B) 1 1/3 tons of pineapples C) 2 tons of pineapples D) 90 tons of pineapples