Multiple Choice- Macroeconomic Policy - college intro course Suppose that govern

Question

Multiple Choice- Macroeconomic Policy - college intro course

Suppose that government wishes to affect the level of aggregate demand in the economy. All of the following, except one, are consistent policy measures. Which is the exception?

A. A tax increase and an increase in money supply

B. A tax reduction and an increase in money supply

C. An increase in government spending and an increase in money supply

D. A decrease in government spending and a decrease in money supply.

please explain your choice of answer

Explanation / Answer

A. A tax increase and an increase in money supply

Tax increase will decrease aggregate demand while increase in money supply will increase aggregate demand. If both these actions are atken together, aggregate demand will not change.

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