Which of the following might be considered the most expansionary set of fiscal policies?
A)increase in government purchases,increase in taxes,and decrease in transfer payments
B)decrease in government purchases,increase in taxes,and decrease in transfer payments
C)increase in government purchases,decrease in taxes,and increase in transfer payments
D)increase in government purchases,increase in taxes,and increase in transfer payments
E)decrease in government purchases,decrease in taxes,and decrease in transfer payments

Question

Quizplus · Accepted Answer

An expansionary fiscal policy is one that is geared to increase aggregate demand in the economy. It involves increasing government spending, reducing taxes and/or increasing transfer payments to stimulate economic growth. Of the options given, the most expansionary set of fiscal policies would be to increase government purchases (which would increase government spending), decrease taxes (which would encourage consumers to spend more and save less), and increase transfer payments (which would increase disposable income and hence consumption). Option C satisfies all of these conditions, making it the most expansionary set of fiscal policies.

Which of the Following Might Be Considered the Most Expansionary