Which Combination of Fiscal Policy Actions Would Be Most Contractionary

question 8

Multiple Choice

Which combination of fiscal policy actions would be most contractionary for an economy experiencing severe demand-pull inflation?

• A)increase taxes and government spending
• B)decrease taxes and government spending
• C)increase taxes and decrease government spending
• D)decrease taxes and increase government spending

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Definitions:

Notes Payable

Written promissory notes in which a borrower agrees to pay back the lender at a later date, often with interest.

Common Stock

A type of security that represents ownership in a corporation, giving holders voting rights and a share in the company's profits via dividends.

Dividends

Earnings distributed to a company's shareholders, commonly as a profit disbursement.

Fees Earned

Income received for services provided, often used in professional and consulting business models.