Exhibit 11-2
-Which of the following sets of policies would unquestionably move the economy illustrated in Exhibit 11-2 to full employment?
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

Exhibit 11-2 
-Which of the following sets of policies would unquestionably move the economy illustrated in Exhibit 11-2 to full employment?
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

Quizplus · Accepted Answer

An increase in government purchases and a decrease in taxes will increase aggregate demand and thus increase output and employment, while an increase in transfer payments will further stimulate demand by putting more money in the hands of consumers. Therefore, the best choice is C: increase in government purchases, decrease in taxes, and increase in transfer payments.

Exhibit 11-2 -Which of the Following Sets of Policies Would Unquestionably Move