If government policy makers are worried about the inflationary potential of the economy,which of the following would NOT be a correct fiscal policy change?
A)reducing transfer payments
B)increasing consumption taxes
C)increasing the budget surplus
D)increasing government purchases of goods and services

Question

Quizplus · Accepted Answer

Increasing government purchases of goods and services would increase aggregate demand and potentially contribute to inflation, so it would not be a correct fiscal policy change if policy makers are worried about inflationary potential. The other options listed would reduce aggregate demand and potentially mitigate inflationary pressures.

If Government Policy Makers Are Worried About the Inflationary Potential