If autonomous investment spending falls as a result of a decline in the expected rate of return on investment, GDP would not have to fall if the government __________ taxes or __________ government spending.
A) increased; increased
B) increased; decreased
C) decreased; increased
D) decreased; decreased

Question

Quizplus · Accepted Answer

Decreasing taxes or increasing government spending are fiscal policies that can stimulate demand in the economy, offsetting the negative impact of a fall in autonomous investment spending on GDP.

If Autonomous Investment Spending Falls as a Result of a Decline