Appleville is a village that specializes in all forms of apple products. Suppose that each winter, when no apples are being produced, the aggregate output falls below the long-run output level. What type of fiscal policy might be most effective to correct this problem?
A) Reducing taxes in order to decrease aggregate demand.
B) Increasing government spending in order to increase aggregate demand.
C) Decreasing government spending in order to increase aggregate demand.
D) Increasing taxes in order to increase aggregate demand.
Ans: B) Increasing government spending in order to increase aggregate demand.
You might also like to view...
Which of the following statements is correct?
A) Monopolies are guaranteed to earn an economic profit. B) The market demand and the firm's demand are the same for a monopoly. C) Monopolies have perfectly inelastic demand for the product sold. D) Because a monopoly is the only firm in the market, its supply curve is the same as the market demand curve. E) Because a monopoly is the only firm in the market, its marginal revenue curve must be the same as the market demand curve.
A good with a horizontal demand curve has a demand
A) with an income elasticity of demand equal to 0. B) with a price elasticity of demand equal to 0. C) with a price elasticity of demand equal to infinity. D) for which there are no substitutes.