The Set of fiScal Policies That Would Be Most Contractionary

question 152

Multiple Choice

The set of fiscal policies that would be most contractionary would be a(n)

• A) increase in government spending and taxes.
• B) decrease in government spending and taxes.
• C) increase in government spending and a decrease in taxes.
• D) decrease in government spending and an increase in taxes.

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Definitions:

Domestic Currency

The currency that is legal tender in a country and used for domestic transactions.

Overvalued Currency

A currency that is traded at a price higher than its intrinsic value, often due to government intervention or speculative demand.

Manufacturing-Dependent

Describes economies or regions that primarily rely on the manufacturing sector for economic growth and employment.

Domestic Production

Goods and services produced within a country’s borders, contributing to its gross domestic production (GDP).