If government policy makers were worried about the inflationary potential of the economy, which of the following would be a correct fiscal policy change?

Question

Quizplus · Accepted Answer

Decreasing government purchases of goods and services would decrease the amount of money circulating in the economy, thus reducing the demand-pull inflationary pressure. The other options would potentially increase the amount of money in the economy, leading to higher inflation. Increasing transfer payments and the budget deficit would increase aggregate demand, while decreasing consumption taxes would increase disposable income and encourage spending.

If Government Policy Makers Were Worried About the Inflationary Potential