Suppose Inflation Is a Threat Because the Current Aggregate Demand

question 48

Multiple Choice

Suppose inflation is a threat because the current aggregate demand curve will increase by $600 billion at any price level. If the marginal propensity to consume is 0.75, federal policymakers can follow Keynesian economics and restrain inflation by:

• A) decreasing tax revenues by $600 billion.
• B) decreasing transfer payments by $200 billion.
• C) increasing tax revenues by $200 billion.
• D) increasing government purchases by $150 billion.

---

Definitions:

Psychoanalytic Explanation

An approach to understanding behavior that emphasizes unconscious motives and conflicts, originating from Freudian theory.

Governor

A governor is an elected official who serves as the head of a state or province in a federal system, wielding executive authority and responsibility over government operations and policies within that jurisdiction.

Conscious Awareness

A state of being where an individual is fully alert and aware of their thoughts, feelings, and environment.

Psychotherapy

A therapeutic intervention centered on talking with a mental health professional to address emotional or psychological issues.