Which of the following is most likely to close a recessionary gap in the economy?
A)A decrease in the expenditure on infrastructure
B)An increase in the income tax rate
C)An increase in the rate of foreign exchange
D)A decrease in money supply
E)An increase in the compensation for government employees

Question

Quizplus · Accepted Answer

An increase in compensation for government employees would increase government spending, which would increase aggregate demand and help to close a recessionary gap in the economy. Decreasing expenditure on infrastructure, increasing income tax rates, decreasing money supply, and increasing the rate of foreign exchange would all decrease aggregate demand and likely worsen the recessionary gap.

Which of the Following Is Most Likely to Close a Recessionary