Which of the following might be considered the most contractionary set of fiscal

Question

Which of the following might be considered the most contractionary set of fiscal policies?

a. increase in government purchases, increase in taxes, and decrease in transfer payments
b. decrease in government purchases, increase in taxes, and decrease in transfer payments
c. increase in government purchases, decrease in taxes, and increase in transfer payments
d. increase in government purchases, increase in taxes, and increase in transfer payments
e. decrease in government purchases, decrease in taxes, and decrease in transfer payments

Which of the following statements is true?

a. Keynes believed wages and prices are often too flexible - falling wages can cause a recession.
b. Keynes believed an economy could get stuck in a recessionary gap.
c. Keynes advocated running government surpluses in times of recession.
d. Keynes believed the economy is self-regulating.
e. b and c

Explanation / Answer

b. decrease in government purchases, increase in taxes, and decrease in transfer payments

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