Assume that an inflationary gap must be closed by reducing aggregate expenditures. If consumers refuse to cut spending on consumption and producers won't cut demand for investment goods, the President:
A)can do nothing.
B)must build more roads.
C)must borrow from Wall Street.
D)must increase Social Security expenditures.
E)must cut government spending.

Question

Quizplus · Accepted Answer

Reducing government spending is a direct way to decrease aggregate expenditures, which can help close an inflationary gap when consumers and producers are unwilling to reduce their spending.

Assume That an Inflationary Gap Must Be Closed by Reducing