Which of the following might NOT be effective in eliminating a recessionary gap?
A) a reduction in Old Age Security payments to beneficiaries
B) a reduction in personal income taxes
C) an increase in expenditures for the Trans-Canada Highway
D) a reduction in corporate income taxes

Question

Which of the following might NOT be effective in eliminating a recessionary gap?  
A) a reduction in Old Age Security payments to beneficiaries 
B) a reduction in personal income taxes 
C) an increase in expenditures for the Trans-Canada Highway 
D) a reduction in corporate income taxes

Quizplus · Accepted Answer

A reduction in Old Age Security payments to beneficiaries would reduce aggregate demand, leading to a further contraction of the economy and worsening the recessionary gap. The other choices would increase aggregate demand and stimulate economic growth, helping to eliminate the gap.

Which of the Following Might NOT Be Effective in Eliminating