Which of the Following Represents the Most Contractionary Fiscal Policy

question 123

Multiple Choice

Which of the following represents the most contractionary fiscal policy?

• A) A $30 billion tax cut.
• B) A $30 billion increase in government spending.
• C) A $30 billion tax increase.
• D) A $30 billion decrease in government spending.

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Definitions:

Resource Heterogeneity

The principle that resources needed for production, such as labor, capital, and land, differ in their quality and composition across firms or economies.

Temporary Competitive Advantage

A situation where a firm gains an edge over its competitors for a short period due to unique resources or positioning.

Redesign Production

This refers to the process of changing the way a product is created or manufactured to improve efficiency, quality, or adapt to new market demands.

Resource Heterogeneity

The principle that resources and capabilities differ across firms, which can lead to competitive advantages for firms that have unique, valuable, and inimitable resources.