Which of the Following Statements About Fiscal Policy Is the Best

question 4

Multiple Choice

Which of the following statements about fiscal policy is the best example of "gross tuning"?

• A)The government decreases tax rates to decrease an inflationary gap.
• B)The government continuously alters its spending and taxing plans to hold real GDP at potential.
• C)The government uses automatic stabilizers to reduce any output gaps.
• D)The government cuts taxes to remove a large and persistent recessionary gap.
• E)The government increases its spending to reduce an inflationary gap.

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