In 1965 during the Johnson administration, the U.S. economy was headed toward an inflationary gap. Which of the following policies would an economist recommend?
A) An open market purchase
B) A tax increase
C) A tax cut
D) Increase defense spending

Question

Quizplus · Accepted Answer

A tax increase can help decrease aggregate demand, which could help close the inflationary gap. Open market purchases increase the money supply and can also contribute to inflation, while a tax cut or an increase in defense spending would increase aggregate demand and exacerbate the inflationary gap.

In 1965 During the Johnson Administration, the U