Assume the Economy Is Experiencing an Inflationary Gap and the Government

question 123

Multiple Choice

Assume the economy is experiencing an inflationary gap and the government has a budget surplus.Which of the following is a correct example of counter-cyclical fiscal policy with the corresponding effect on the budget?

• A)Government spending increases causing a smaller budget surplus.
• B)Government spending increases causing a larger budget surplus.
• C)Tax rates decrease causing a smaller budget surplus.
• D)Government spending decreases causing a larger budget surplus.
• E)Transfer payments and tax rates both decrease.

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Definitions:

Information Processing

The means by which individuals perceive, analyze, manipulate, store, and recall information.

Working Memory

A mental system tasked with briefly maintaining data for processing.

Storage

The process or method by which information, data, or goods are kept for future use or retrieval.

Retrieval

The process of accessing and bringing into conscious thought information stored in memory.