Which of the Following Combinations of Changes Would Have a Contractionary

question 37

Multiple Choice

Which of the following combinations of changes would have a contractionary effect on aggregate demand?

• A)An increase in government purchases and an increase in transfer payments.
• B)An increase in taxes and an increase in transfer payments.
• C)A decrease in taxes and an increase in transfer payments.
• D)An increase in taxes and a decrease in government purchases.

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Definitions:

Accounts Payable

The amount of money owed by a company to its creditors for goods or services that have been delivered or used but not yet paid for.

Credit

An accounting entry that increases liabilities or equity or decreases an asset or expense.

Signature Card

A form signed by a bank customer that the bank uses to verify signature authenticity on all checks.