Which of the following ﬁscal policy actions is most likely to increase aggregate supply?
A) an increase in personal income tax rates
B) a reduction in interest rates that encourages consumers to purchase more durable goods
C) an increase in transfer payments to unemployed workers
D) an increase in government spending on infrastructure that increases private sector productivity

Question

Quizplus · Accepted Answer

An increase in government spending on infrastructure will enhance the productive capacity of the private sector by improving transportation infrastructure, communication systems, and energy infrastructure, among other things. This will increase the economy's aggregate supply, enabling it to produce more goods and services at lower prices.

Which of the Following ﬁScal Policy Actions Is Most Likely