Which of the following is an example of an expenditure-reducing policy?
A) a devaluation of the par value of a currency
B) a decrease in government spending
C) a decrease in import duties
D) a decrease in business taxes

Question

Quizplus · Accepted Answer

Expenditure-reducing policies are used to decrease the level of aggregate demand in the economy. This can be achieved through reducing government spending, which will decrease the amount of money circulating in the economy and therefore decrease aggregate demand. Options A, C, and D are examples of expenditure-switching policies, which aim to shift aggregate demand from imports to domestic goods or from one sector to another, rather than reducing overall aggregate demand.

Which of the Following Is an Example of an Expenditure-Reducing