Suppose the Equilibrium Level of Income Exceeds the Full Employment

question 92

Multiple Choice

Suppose the equilibrium level of income exceeds the full employment level of income and there is high inflation. The government thus decides to implement a fiscal policy that will act to reduce national output and prices. This can be accomplished by

• A) increasing government spending so that aggregate expenditures are increased.
• B) raising taxes and government spending by the same amount so that aggregate supply is decreased and aggregate demand is increased.
• C) decreasing government spending so that aggregate demand is reduced.
• D) lowering average tax rates so that aggregate supply is increased.
• E) increasing transfer payments so that aggregate expenditures decline.

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The psychological reaction involving feelings, such as happiness, anger, or sadness, triggered by stimuli or events.

Childhood Experiences

Events, situations, or environments a person was exposed to during their early years, which can significantly influence their development and personality.

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