Which of the following might offset the effects of a decline in the value of financial assets, such as stocks, on consumption and the economy?
A)increasing government spending
B)decreasing the money supply
C)increasing taxes
D)increasing both taxes and money supply

Question

Quizplus · Accepted Answer

Increasing government spending can offset the effects of a decline in the value of financial assets by injecting more money into the economy, which can boost consumer confidence and increase demand for goods and services.

B, C, and D are unlikely to offset the effects of a decline in the value of financial assets. Decreasing the money supply (choice B) would likely worsen the situation by reducing liquidity and making it harder for consumers and businesses to access credit. Increasing taxes (choice C) would reduce disposable income, which could reduce consumption further. Increasing both taxes and money supply (choice D) may cause inflation and reduce the value of money, which could further discourage investment and consumption.

Which of the Following Might Offset the Effects of a Decline