Which of the Following Fiscal Policy Changes Would Be the Most

question 31

Multiple Choice

Which of the following fiscal policy changes would be the most contractionary?

• A) A $40 billion increase in taxes
• B) A $10 billion increase in taxes and a $30 billion cut in government spending
• C) A $20 billion increase in taxes and a $20 billion cut in government spending
• D) A $30 billion increase in taxes and a $10 billion cut in government spending

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Definitions:

Notes Payable

Financial obligations represented by written promissory notes that specify the terms under which a borrower agrees to repay a lender.

Owner's Capital

Represents the total equity of the owner in a business, which consists of the initial and additional investments minus any withdrawals.

18-Month Insurance

This term refers to a prepaid insurance policy that covers a period of 18 months, recognized as an asset initially and expensed over the duration of the coverage.

Weekly Payroll

The total sum of all employee earnings paid on a weekly basis.