Which of the Following fiScal Policy Actions Is Most Likely

question 203

Multiple Choice

Which of the following fiscal policy actions is most likely to increase aggregate supply?

• A) an increase in personal income tax rates
• B) a reduction in interest rates that encourages consumers to purchase more durable goods
• C) an increase in transfer payments to unemployed workers
• D) an increase in government spending on infrastructure that increases private sector productivity

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Definitions:

Drive-Reduction Theory

A theory in psychology proposing that the motivation of behavior arises from biological needs that drive an organism to seek homeostasis.

Bodily Needs

Fundamental physiological requirements critical for the survival and proper functioning of the human body, such as food, water, and sleep.

Tension

A state of mental or emotional strain or stress resulting from adverse or demanding circumstances.

Acquired Drive

A learned or conditioned drive that results from experiences or social influences, rather than innate biological needs.