Which of the Following Would Decrease the Size of a Federal

question 27

Multiple Choice

Which of the following would decrease the size of a federal budget deficit?

• A) a recession
• B) an increase in defense spending
• C) an increase in the use of automatic stabilizers
• D) an increase in taxes
• E) an increase in transfer payments

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Definitions:

Disposable Income

The cash reserves left for households to spend and save after paying income taxes.

Disposable Income

Funds households have for saving and spending following the deduction of income taxes.

Disposable Income

Disposable income for households after accounting for income taxes, meant for spending and saving.

Marginal Propensity

The ratio of change in an economic variable, such as consumption or saving, to a change in another variable, like income.