An appropriate fiscal policy response when aggregate demand is growing at a slower rate than aggregate supply is to cut taxes.

Name: An appropriate fiscal policy response when aggregate demand is growing at a slower rate than aggregate supply is to cut taxes.
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Question

Quizplus · Accepted Answer

Cutting taxes can increase disposable income for consumers and investment funds for businesses, thereby stimulating spending and helping to increase aggregate demand to better match the growing aggregate supply.

An Appropriate Fiscal Policy Response When Aggregate Demand Is Growing