To combat a recession with discretionary fiscal policy,Congress and the president should
A)decrease government spending to balance the budget.
B)decrease taxes to increase consumer disposable income.
C)lower interest rates and increase investment by increasing the money supply.
D)raise taxes on interest and dividends,but not on personal income.

Question

Quizplus · Accepted Answer

Decreasing taxes will increase consumer disposable income, which will stimulate spending and increase demand for goods and services. This can help to boost the economy by creating jobs and increasing production. Decreasing government spending (choice A) could lead to decreased demand for goods and services and job losses, while lowering interest rates and increasing investment (choice C) is a monetary policy tool that is controlled by the Federal Reserve, not Congress and the president. Raising taxes on interest and dividends (choice D) may discourage saving and investment and could further slow economic growth.

To Combat a Recession with Discretionary Fiscal Policy,Congress and the President