If the objective of government policy during a recession is to increase aggregate demand, then it should
A) raise income taxes.
B) increase government spending.
C) decrease government transfers.
D) decrease government spending.

Question

Quizplus · Accepted Answer

When the objective is to increase aggregate demand, the government needs to increase its spending to boost the economy. Increasing income tax or decreasing government transfers can reduce consumer spending and further worsen the recession. Decreasing government spending can also lead to the same negative effects on the economy.

If the Objective of Government Policy During a Recession Is