A Fiscal Policy Action to Close an Expansionary Gap Is

question 122

Multiple Choice

A fiscal policy action to close an expansionary gap is to:

• A)decrease taxes.
• B)increase transfer payments.
• C)decrease government purchases.
• D)increase the marginal propensity to consume.

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Definitions:

Fixedness

A cognitive bias that limits a person to using an object only in the way it is traditionally used.

Heuristics

Mental shortcuts or rules of thumb that simplify decision making and problem solving, although not always perfectly accurate.

Creativity

The ability to produce original and unusual ideas, or to make something new or imaginative.

Sunk-Cost Fallacy

A cognitive error where past investments of time, effort, or money are taken into account when making a decision, even though they cannot be recovered.