If Policymakers Are Concerned That the Economy Is in Danger

question 85

Multiple Choice

If policymakers are concerned that the economy is in danger of rising inflation because aggregate demand is increasing faster than aggregate supply,the appropriate fiscal policy response is to

• A)increase taxes.
• B)increase government spending.
• C)use expansionary fiscal policy.
• D)increase interest rates.

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Definitions:

Horizontal Merger

A business consolidation that occurs between firms operating in the same industry or producing similar products or services.

Diversification

Investment in more than one asset; returns do not move proportionally in the same direction at the same time, thus reducing risk.

Acquisition

The process of taking control of another company either by purchasing its shares or assets.

Complementary Resources

Resources that, when used in conjunction with another, enhance each other's value or productivity.