When Policy Makers Choose Between Tax Policy and Spending Policy

question 116

Multiple Choice

When policy makers choose between tax policy and spending policy to affect the level of aggregate demand, they tend to choose on the basis of

• A)how large a public sector they want.
• B)how much they want to change aggregate demand.
• C)how much they want to change aggregate supply.
• D)which has the larger multiplier.

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Definitions:

FAFSA

Free Application for Federal Student Aid; a form used by students to apply for financial aid for college or graduate school in the United States.

Taxable Income

The portion of an individual's or entity's income used to determine how much tax is owed to the government in a specific tax period.

Untaxed Income

Earnings that are not subject to taxation by governmental authorities.

Assets

Resources owned by an individual or business that have economic value and can be used to meet debts or commitments.