Which combination of fiscal policy actions would most likely offset each other?
A) Increase taxes and government spending
B) Decrease taxes and increase government spending
C) Increase taxes, but make no change in government spending
D) Decrease government spending, but make no change in taxes

Question

Quizplus · Accepted Answer

Increasing taxes reduces disposable income and consumption, while increasing government spending injects money into the economy. These actions can offset each other, as one is contractionary and the other is expansionary.

Which Combination of Fiscal Policy Actions Would Most Likely Offset