If the economy has an inflationary GDP gap, one possible solution is to increase taxes.
Answer the following statement true (T) or false (F)
True
An increase in taxes will decrease consumers' disposable income, thus shifting the AD curve to the left. The fiscal policies available to the federal government for decreasing aggregate demand are to decrease government spending, increase taxes, or decrease transfer payments.
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To the extent that a direct expenditure offset results from an expansionary fiscal policy,
A) the fiscal policy will not be discretionary. B) the time lags associated with the implementation of fiscal policy will shorten. C) the stimulative effect will be less than anticipated. D) the stimulative effect will be more than anticipated.
The inefficiency of a sales tax on a good is ultimately the result of the
A) low tax revenue earned by the government relative to the cost of collection. B) wedge between what buyers pay for the good and what sellers receive for the good. C) buyers being unable to avoid paying the tax. D) sellers being unable to avoid paying the tax. E) increase in the consumer surplus that is more than offset by the decrease in the producer surplus.