1. If the government is required to balance the budget and the economy falls into a recession, which of the actions is a feasible policy response? - invest in infrastructure - cut spending equal to the reduction in tax revenue - cut taxes to encourage consumer spending - increase government spending to stimulate the economy 2. What is a likely consequence of this policy? - The negative consequences of the recession are magnified. - Consumer spending increases due to their ability to keep more of their after-tax income. - Unemployment falls due to the economic stimulus. - There is hyperinflation due to an increase in aggregate demand.
1. If the government is required to balance the budget and the economy falls into a recession, which of the actions is a feasible policy response? - invest in infrastructure - cut spending equal to the reduction in tax revenue - cut taxes to encourage consumer spending - increase government spending to stimulate the economy 2. What is a likely consequence of this policy? - The negative consequences of the recession are magnified. - Consumer spending increases due to their ability to keep more of their after-tax income. - Unemployment falls due to the economic stimulus. - There is hyperinflation due to an increase in aggregate demand.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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1. If the government is required to balance the budget and the economy falls into a recession, which of the actions is a feasible policy response?
- invest in infrastructure
- cut spending equal to the reduction in tax revenue
- cut taxes to encourage consumer spending
- increase government spending to stimulate the economy
2. What is a likely consequence of this policy?
- The negative consequences of the recession are magnified.
- Consumer spending increases due to their ability to keep more of their after-tax income.
- Unemployment falls due to the economic stimulus.
- There is hyperinflation due to an increase in aggregate demand .
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