Which of the following might be considered the most expansionary set of fiscal policies?
A) increase government purchases, increase taxes, and decrease transfer payments
B) decrease government purchases, increase taxes, and decrease transfer payments
C) increase government purchases, decrease taxes, and increase transfer payments
D) increase government purchases, increase taxes, and increase transfer payments

Question

Which of the following might be considered the most expansionary set of fiscal policies?  
A) increase government purchases, increase taxes, and decrease transfer payments 
B) decrease government purchases, increase taxes, and decrease transfer payments 
C) increase government purchases, decrease taxes, and increase transfer payments 
D) increase government purchases, increase taxes, and increase transfer payments

Quizplus · Accepted Answer

An expansionary fiscal policy aims to increase aggregate demand and stimulate economic growth. Increasing government purchases and transfer payments, and decreasing taxes can help boost aggregate demand. Option C includes all three expansionary policies, therefore it is the most expansionary set of fiscal policies.

Which of the Following Might Be Considered the Most Expansionary