Which of the Following Fiscal Policy Actions Is Most Likely

question 40

Multiple Choice

Which of the following fiscal policy actions is most likely to increase aggregate supply?

• A) An increase in personal income tax rates.
• B) A reduction in interest rates that encourages consumers to purchase more durable goods.
• C) An increase in transfer payments to unemployed workers.
• D) An increase in government spending on infrastructure that increases private sector productivity.

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Definitions:

Best Alternative

The Best Alternative usually refers to the most favorable option or choice that is available to an individual or organization from a set of possibilities.

Benefits

Forms of compensation provided to employees or the public, including health insurance, pension, and unemployment assistance.

Opportunity Cost

The cost of what is forgone in order to pursue a certain action; the value of the best alternative option that is not selected.

Subjective Values

The notion that the value of goods and services is determined by the preferences and perceptions of individuals, rather than by intrinsic characteristics.