To Eliminate an Inflationary Gap Using Fiscal Policy, the Government

question 21

Multiple Choice

To eliminate an inflationary gap using fiscal policy, the government could

• A)only decrease taxes.
• B)increase taxes.
• C)increase government expenditure on goods and services and simultaneously decrease taxes by an equal amount.
• D)increase government expenditure on goods and services and simultaneously increase taxes by an equal amount.
• E)decrease the quantity of money.

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Definitions:

Normative Values

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Economic Decision Maker

An individual or entity that makes choices regarding the allocation of resources and the distribution of goods and services in an economy.

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Simplified representations of reality used to analyze and predict economic phenomena.

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