Using fiscal policy, how can the government stimulate the economy?
A) decrease spending and cut taxes
B) decrease spending and raise taxes
C) increase spending and cut taxes
D) increase spending and raise taxes

Question

Quizplus · Accepted Answer

By increasing government spending and cutting taxes, the government can provide a stimulus to the economy. Increased government spending means that more money is circulating in the economy, and cutting taxes means that individuals and businesses have more money to spend and invest. This can increase aggregate demand, leading to more economic activity and potentially increasing economic growth. Decreasing spending and/or raising taxes can have the opposite effect, reducing economic activity and potentially leading to a contraction of the economy.

Using Fiscal Policy, How Can the Government Stimulate the Economy