To increase the price level the government could adopt policies that
A) increase aggregate supply and aggregate demand.
B) decrease aggregate supply and aggregate demand.
C) increase aggregate supply and decrease aggregate demand.
D) decrease aggregate supply and increase aggregate demand.

Question

Quizplus · Accepted Answer

To increase the price level, the government should decrease aggregate supply and increase aggregate demand. This can be achieved through policies such as reducing taxes, increasing government spending, or lowering interest rates, which will increase consumer spending and investment, leading to an increase in aggregate demand. On the other hand, policies such as implementing trade restrictions or imposing regulations that increase production costs will decrease aggregate supply. Therefore, decreasing aggregate supply and increasing aggregate demand will result in an increase in prices.

To Increase the Price Level the Government Could Adopt Policies