Which of the following policy options would not be used to eliminate an inflationary gap?
A) Decrease government spending.
B) Decrease consumption.
C) Increase investment.
D) Decrease taxes.

Question

Quizplus · Accepted Answer

Increasing investment would not be effective in eliminating an inflationary gap. This is because the increase in investment would lead to more spending and potentially worsen the inflationary gap, rather than reducing it. The other options, such as decreasing government spending, decreasing consumption, or decreasing taxes, would help to reduce aggregate demand and close the inflationary gap.

Which of the Following Policy Options Would Not Be Used