Assume That Aggregate Demand in the Economy Is Excessive, Causing

question 174

Multiple Choice

Assume that aggregate demand in the economy is excessive, causing an inflationary gap.Which of the following would be most in accord with appropriate government fiscal policy?

• A)an increase in federal income tax rates
• B)an increase in the size of income tax exemptions for each dependent
• C)passage of legislation providing for the construction of 8,000 new post office buildings
• D)an increase in soil conservation subsidies to farmers

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Definitions:

Economic Efficiency

A situation where resources are allocated in a way that maximizes the net benefit to society or achieves the desired output with the least waste.

Negative Externalities

Costs suffered by a third party as a result of an economic transaction or activity, not reflected in the transaction's price.

Traffic Congestion

A condition on road networks that occurs as use increases, and is characterized by slower speeds, longer trip times, and increased vehicular queueing.

Express Lanes

Specifically designated traffic lanes designed to reduce congestion by allowing vehicles meeting certain criteria, such as carpooling or toll payment, to use a less congested lane.