A Specific Reduction in Government Spending Will Dampen Demand-Pull Inflation

question 333

Multiple Choice

A specific reduction in government spending will dampen demand-pull inflation by a greater amount the

• A) smaller is the economy's MPC.
• B) flatter is the economy's aggregate supply curve.
• C) smaller is the economy's MPS.
• D) less is the economy's built-in stability.

---

Definitions:

Marginal Tax Rate

The tax rate applied to the next dollar of taxable income, indicating how much tax will be paid on an additional dollar earned.

Average Tax Rate

The fraction of total income that is paid as taxes, calculated by dividing the total amount of tax paid by the total income.

Income

The money received by an individual or group for work, from investments, or from other sources, often used as an indicator of economic standing.

Marginal Tax Rate

The percentage of tax applied to your next dollar of income, indicating the tax bracket rate for each additional dollar earned.