A Fiscal Policy Action to Close a Recessionary Gap Is

question 23

Multiple Choice

A fiscal policy action to close a recessionary gap is to:

• A)increase taxes.
• B)decrease transfer payments.
• C)increase government purchases.
• D)increase the marginal propensity to consume.

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Definitions:

Elasticity of Supply

A measure of how much the quantity supplied of a good responds to a change in the price of that good.

Income Elasticity

A measure of how much the demand for a product changes with a change in consumers' income.

Quantity Supplied

the amount of a good or service that producers are willing and able to sell at a given price.

Elastic

Describes a situation where a change in one factor (such as price) leads to a relatively larger change in another factor (such as quantity demanded or supplied).