Country Z Is Suffering from the Effects of a Negative

question 7

Multiple Choice

Country Z is suffering from the effects of a negative supply shock.If the government's main goal is to return output to potential,then it will ________.If the government's main goal is to maintain low and stable inflation,then it will ________.

• A) pursue expansionary fiscal policy; take no action
• B) pursue contractionary fiscal policy; pursue expansionary fiscal policy
• C) pursue contractionary fiscal policy; take no action
• D) pursue expansionary fiscal policy; pursue expansionary fiscal policy
• E) take no action; take no action

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Definitions:

Real Estate

Property consisting of land and the buildings on it, along with its natural resources such as crops, minerals, or water.

Corporate Tax System

The regulatory framework governing how businesses are taxed on their profits by the government, including tax rates and allowable deductions.

Progressive

Referring to a tax system where the tax rate increases as the taxable amount increases, ensuring higher earners pay more in taxes.

Capital Gains

The increase in value of an asset or investment over its purchase price, realized upon the sale of the asset.