If overall spending declines and thus the economy contracts, the government could counter this by:
A) raising tax rates.
B) decreasing government transfers.
C) increasing government spending.
D) decreasing government spending.

Question

Quizplus · Accepted Answer

Increasing government spending would inject more money into the economy and stimulate growth, counteracting the decline in overall spending. Raising tax rates or decreasing government transfers would have the opposite effect and further decrease overall spending. Decreasing government spending would also decrease overall spending and would not help to counter the contraction of the economy.

If Overall Spending Declines and Thus the Economy Contracts, the Government