To correct excess demand, the government should

raise its spending and cut taxesCorrect answerYour answercut the repo rateCorrect answerYour answerraise its borrowing to spend moreCorrect answerYour answercut its spending and raise taxesCorrect answerYour answer

Show the answer and explanation

CorrectNot quiteAnswer D

Correct answer: D

Less government spending lowers G directly; higher taxes lower disposable income and consumption.
Both bring AD down towards full-employment output.

Concept: Fiscal policy for excess demand
Typical timeTypical: 70 s
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The rule this testsFiscal measures

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Ten questions from Excess & Deficient Demand, at your own pace.

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Ten questions from Excess & Deficient Demand, at your own pace.

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To correct excess demand, the government should

Explanation