Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
By increasing taxes to reduce disposable income
B
By increasing spending to stimulate demand
C
By cutting government spending to decrease aggregate demand
D
By lowering interest rates to encourage borrowing
Understanding the Answer
Let's break down why this is correct
Answer
A government can decrease inflation through fiscal policy by adjusting its spending and tax policies. To reduce inflation, it might decide to cut back on its own spending or increase taxes for consumers and businesses. However, to avoid increasing unemployment, the government can focus on investing in areas that create jobs, such as infrastructure projects. For example, if the government builds new roads or schools, it can stimulate the economy and create jobs while still controlling inflation by managing overall spending. By carefully balancing these actions, the government can help stabilize prices without causing a rise in unemployment.
Detailed Explanation
Cutting government spending lowers the total money in the economy. Other options are incorrect because Some think raising taxes helps control inflation; Increasing spending seems like a good idea to boost the economy.
Key Concepts
Fiscal Policy
Inflation Control
Unemployment
Topic
Fiscal Policy and Inflation Control
Difficulty
medium level question
Cognitive Level
understand
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