If government policy makers were worried about the inflationary potential of the economy, which of the following would not be a correct fiscal policy change?

Question

Quizplus · Accepted Answer

Increasing government purchases of goods and services would add to the aggregate demand, which may further fuel inflationary pressures. Therefore, it would not be a correct fiscal policy change when the government is worried about inflation. Conversely, choices A, C, and D could all be used to curb inflationary pressures. For instance, increasing consumption taxes, reducing transfer payments, or reducing government expenditure would all help in decreasing aggregate demand, which can help bring down inflation.

If Government Policy Makers Were Worried About the Inflationary Potential