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Figure: Fiscal Policy Options
-(Figure: Fiscal Policy Options) Look at the figure Fiscal Policy Options. If the aggregate demand curve is AD, the most appropriate discretionary fiscal policy is to _____ government spending and _____ income tax rates.
A)decrease; increase
B)decrease; maintain
C)increase; increase
D)increase; maintain

Question

Use the following to answer questions:
Figure: Fiscal Policy Options 
-(Figure: Fiscal Policy Options) Look at the figure Fiscal Policy Options. If the aggregate demand curve is AD, the most appropriate discretionary fiscal policy is to _____ government spending and _____ income tax rates.
A)decrease; increase 
B)decrease; maintain 
C)increase; increase 
D)increase; maintain

Quizplus · Accepted Answer

If the aggregate demand curve is AD, the most appropriate discretionary fiscal policy to stimulate the economy would be to increase government spending and maintain income tax rates, as this would boost aggregate demand without reducing disposable income.

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