Which of the Following Is an Appropriate Fiscal Policy Prescription

question 146

Multiple Choice

Which of the following is an appropriate fiscal policy prescription that addresses the inflation that occurs when the economy is above potential GDP?

• A)Decreasing taxes to protect consumers from the effects of inflation
• B)Increasing taxes to reduce aggregate demand
• C)Increasing government spending to provide some of the goods that consumers can no longer afford at the higher prices
• D)Decreasing government spending to cause a decrease in the demand for money
• E)Increasing transfer payments to poor people,who are hurt the most by the inflation

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Definitions:

Last-In, First-Out

An inventory valuation method that assumes the most recently produced items are sold first, with costs of the latest inventory purchases used first in determining profitability.

Cost of Goods Sold

The direct costs tied to the production of goods sold by a company, including both materials and labor costs.

Perpetual Inventory System

An inventory management method where inventory updates are made continuously as sales are made and purchases are received.

Last-In, First-Out

An inventory valuation method that assumes the most recently produced items are sold first, with costs of the latest inventory purchases recorded as cost of goods sold.