Which of the following fiscal policy actions would definitely cause an increase in the size of a recessionary gap?
A)increases in taxes and cuts in government spending
B)cuts in taxes
C)increases in taxes and increases in government spending
D)cuts in taxes and increases in government spending

Question

Quizplus · Accepted Answer

Increasing taxes and cutting government spending both reduce aggregate demand, which would widen a recessionary gap.

Which of the Following Fiscal Policy Actions Would Definitely Cause