Assuming government wishes to either increase or decrease the level of aggregate demand,which of the following pairs are not consistent policy measures?

Question

Quizplus · Accepted Answer

A tax increase and an increase in the money supply are not consistent policy measures because they have opposite effects on aggregate demand. A tax increase reduces disposable income and consumption, which leads to a decrease in aggregate demand, while an increase in the money supply stimulates borrowing and spending, which leads to an increase in aggregate demand.

Assuming Government Wishes to Either Increase or Decrease the Level