Use the Following to Answer Questions

question 96

Multiple Choice

Use the following to answer questions .
Exhibit: Fiscal Policy Options
-(Exhibit: Fiscal Policy Options) If the aggregate demand curve is AD₁, which of the following is the most appropriate discretionary fiscal policy to pursue?

• A) a contractionary fiscal policy involving reductions in government spending and increases in income tax rates
• B) a contractionary fiscal policy involving reductions in government spending and decreases in income tax rates
• C) an expansionary fiscal policy involving increases in government spending and increases in investment tax credits
• D) an expansionary fiscal policy involving increases in government spending and decreases in investment tax credits

---

Definitions:

Accentuation Principle

Categorization accentuates perceived similarities within and differences between groups on dimensions that people believe are correlated with the categorization. The effect is amplified where the categorization and/or dimension has subjective importance, relevance, or value.

Human Attribute

Characteristics, traits, or qualities that define or are inherent in humans, contributing to individual identities and behaviors.

Accentuation Effect

A cognitive bias that emphasizes the differences between categories or groups of people more than they actually exist.

Categorisation

The process of grouping items or information based on shared characteristics or qualities.