Which of the Following Is an Appropriate Fiscal Policy Prescription

question 24

Multiple Choice

Which of the following is an appropriate fiscal policy prescription that addresses the inflation that occurs when the economy is above potential GDP?

• A) decreasing taxes to protect consumers from the effects of inflation.
• B) increasing taxes to reduce aggregate demand.
• C) increasing government spending to provide some of the goods that consumers can no longer afford at the higher prices.
• D) decreasing government spending to cause a decrease in the demand for money.
• E) increasing transfer payments to poor people, who are hurt the most by the inflation.

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Definitions:

CS

Often short for "Conditioned Stimulus," a term used in classical conditioning to denote a previously neutral stimulus that, after being associated with an unconditioned stimulus, elicits a conditioned response.

Direct Experience

Knowledge or skill acquired through immediate observation or participation, without the intermediation of others or the use of technology.

Anticipate

The act of expecting or predicting something to happen in the future and possibly preparing for it.

Associative Learning

The process of learning in which a connection or association is formed between two stimuli or between a behavior and a stimulus.