Raising Taxes as an Element of Discretionary Fiscal Policy Is

question 115

Multiple Choice

Raising taxes as an element of discretionary fiscal policy is intended to reduce aggregate demand, but it can also reduce aggregate supply if

• A) the higher taxes lead workers to seek out a second job.
• B) the higher taxes cause workers to work less.
• C) the government purchases goods with the additional revenue.
• D) the government uses the additional revenue to retire some of the federal debt.
• E) the higher taxes cause people to save less.

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Definitions:

Occupations

Various kinds of jobs or professions individuals engage in to earn a living.

Legal Minimum Wage

The lowest hourly, daily, or monthly remuneration that employers are legally allowed to compensate workers.

Equilibrium Rate

The balance point in financial markets or for specific financial instruments, where supply meets demand.

Marginal Workers

Individuals who are employed in a job that does not fully utilize their skills or capabilities, often due to economic fluctuations or lack of available positions.