If the government wants to run an expansionary fiscal policy by increasing consumption,the best alternative is likely to be:
A)an income tax cut.
B)a company tax cut.
C)an income tax rise.
D)a company tax rise.
E)a payroll tax cut.

Question

Quizplus · Accepted Answer

An income tax cut would increase the disposable income of consumers, encouraging them to spend more on consumption. This would lead to an increase in aggregate demand, stimulating economic growth. A company tax cut or a payroll tax cut would also provide some benefits, but the income tax cut would have the most direct impact on consumer spending. An income tax rise or a company tax rise would have the opposite effect, reducing consumer spending and slowing down the economy.

If the Government Wants to Run an Expansionary Fiscal Policy