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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 ADʺ, the most appropriate discretionary fiscal policy is to _____ government spending and _____ income tax rates.
A)increase; decrease
B)increase; maintain
C)decrease; decrease
D)decrease; 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 ADʺ, the most appropriate discretionary fiscal policy is to _____ government spending and _____ income tax rates.
A)increase; decrease 
B)increase; maintain 
C)decrease; decrease 
D)decrease; maintain

Quizplus · Accepted Answer

If the aggregate demand curve is ADʺ, it suggests that the economy is experiencing high demand, possibly leading to inflation. The appropriate discretionary fiscal policy would be to decrease government spending and maintain income tax rates to cool down the economy.

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