Which of the Following Is an Appropriate Fiscal Policy to Address

question 75

Multiple Choice

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

• A)Decrease taxes to protect consumers from the effects of inflation.
• B)Increase taxes to reduce aggregate demand.
• C)Increase government spending to provide some of the goods consumers can no longer afford at the higher prices.
• D)Decrease government spending so that the demand for money will fall.
• E)Increase transfer payments to poor people,who are hurt the most by the inflation.

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Definitions:

Decision Tree

A graphical representation used in decision analysis to lay out choices and their possible consequences, including chance event outcomes, resource costs, and utility.

Capital Asset Pricing Model

A model that describes the relationship between systematic risk and expected return for assets, particularly stocks.

Expansion Option

An opportunity in capital budgeting for a company to invest in additional projects or assets based on its initial project's success.

Decision Tree Analysis

A graphical representation of possible solutions to a decision based on different conditions or events, used in risk management and decision making.