Which of the following combinations of actions by Congress and the Federal Reser
ID: 1201062 • Letter: W
Question
Which of the following combinations of actions by Congress and the Federal Reserve would be most effective in stimulating an economy that is operating below full employment?
An increase in the money supply when personal income taxes decrease.
An increase in the money supply when personal income taxes increase.
An increase in the money supply when government spending decreases.
An increase in interest rates when government spending increases.
A decrease in interest rates when personal income taxes increase.
Explanation / Answer
An increase in the money supply when personal income taxes decrease.
When personal taxes are lower then purchasing power of individual increases and if Congress and Federal Reserve increase money supply in this case then empoyment in an economy increases as people want to work more.
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