FIGURE 22-5
-Refer to Figure 22-5,Diagram 2.Which of the following fiscal policy measures could the government implement to return national income to the full-employment level of GDP (potential output,Y*)?
A)reduce government spending
B)reduce transfer payments
C)increase taxes
D)increase government spending
E)decrease disposable income

Question

FIGURE 22-5
-Refer to Figure 22-5,Diagram 2.Which of the following fiscal policy measures could the government implement to return national income to the full-employment level of GDP (potential output,Y*)?
A)reduce government spending 
B)reduce transfer payments 
C)increase taxes 
D)increase government spending 
E)decrease disposable income

Quizplus · Accepted Answer

Increasing government spending is an expansionary fiscal policy measure that can help boost aggregate demand, thereby increasing national income towards the full-employment level of GDP.

FIGURE 22-5 -Refer to Figure 22-5,Diagram 2.Which of the Following Fiscal Policy