To close an inflationary gap with fiscal policy, the government could:
A) reduce budget allocations to interstate highway maintenance.
B) increase federal subsidies to state universities.
C) lower the corporate income tax rate.
D) raise the average amount awarded for a disability pension.

Question

Quizplus · Accepted Answer

To close an inflationary gap, the government needs to decrease aggregate demand. Reducing budget allocations to interstate highway maintenance would decrease government spending, thus helping to close the inflationary gap.

To Close an Inflationary Gap with Fiscal Policy, the Government