Which One of the Following Would Be the Most Appropriate

question 78

Multiple Choice

Which one of the following would be the most appropriate stabilization policy if the economy is operating beyond its long-run potential capacity?

• A)an increase in government purchases, holding taxes constant
• B)a purchase of bonds by the Bank of Canada
• C)an increase in the bank rate
• D)a reduction in taxes, holding government purchases constant

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Definitions:

Perfectly Competitive Firms

Businesses operating in a market where no single buyer or seller has the power to influence prices, and products are homogeneous, resulting in many sellers and buyers.

Industry Output

Industry Output is the total product or service produced within an industry, which is a key indicator of economic activity and health.

Government

The governing body of a nation, state, or community, charged with regulating and administering public policy and affairs.

Essential Resource

A necessary input or resource that is fundamental for the functioning and sustainability of an economy or ecosystem.