FIGURE 22-5 -Refer to Figure 22-5,Diagram 2.Which of the Following Fiscal Policy

question 79

Multiple Choice

FIGURE 22-5
-Refer to Figure 22-5,Diagram 2.Which of the following fiscal policy measures could the government implement to return national income to the full-employment level of GDP (potential output,Y*) ?

• A)reduce government spending
• B)reduce transfer payments
• C)increase taxes
• D)increase government spending
• E)decrease disposable income

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Definitions:

Income

Earnings from work or investment, which are critical for determining spending and saving behaviors within an economy.

Utility Function

A mathematical representation in economics that quantifies the satisfaction or happiness a consumer derives from consuming goods and services.

Tape Recorder

An electronic device used for recording sound on magnetic tape and subsequently playing back the recorded audio.

Tapes

Are thin strips of material, traditionally magnetic, used for recording sound, images, or data, though often supplanted by digital media.