Which of the following statements about fiscal policy is the best example of "gross tuning"?
A)The government continuously alters its spending and taxing plans to hold real GDP at potential.
B)The government cuts taxes to remove a large and persistent recessionary gap.
C)The government increases its spending to reduce an inflationary gap.
D)The government decreases tax rates to decrease an inflationary gap.
E)The government uses automatic stabilizers to reduce any output gaps.

Question

Quizplus · Accepted Answer

Gross tuning refers to significant, deliberate adjustments in fiscal policy aimed at correcting large economic imbalances, such as a persistent recessionary gap. Cutting taxes to stimulate economic activity is an example of such a measure.

Which of the Following Statements About Fiscal Policy Is the Best