Which combination of fiscal policy actions would most likely be offsetting?
A)increase in taxes and government spending
B)decrease in taxes and increase in government spending
C)increase in taxes, but make no change in government spending
D)decrease in taxes, but make no change in government spending

Question

Quizplus · Accepted Answer

Option A is the most likely offsetting combination because an increase in taxes would decrease disposable income and reduce consumption, while an increase in government spending would increase aggregate demand. These actions work in opposite directions and could offset each other's effects.

Which Combination of Fiscal Policy Actions Would Most Likely Be