Which Policy Would Keynes's Followers Support When an Increase in Business

question 15

Multiple Choice

Which policy would Keynes's followers support when an increase in business optimism shifts the aggregate demand curve to the right away from long-run equilibrium?

• A) decreasing taxes
• B) decreasing the interest rate
• C) increasing the money supply
• D) increasing taxes

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Definitions:

Lump Sum Tax

A type of tax that is a fixed amount, no matter the change in circumstance of the taxed entity.

Horizontal Equity

The idea that taxpayers with similar abilities to pay taxes should pay the same amount

Average Tax Rate

The proportion of total income that is paid as tax.

Income Tax

A tax levied by a government directly on income, especially an annual tax on personal income.