📚 Learning Guide
Recession and Fiscal Policy Actions
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Decreasing taxes is to increasing disposable income as increasing government spending is to what?

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Learning Path
Learning Path

Question & Answer
1
Understand Question
2
Review Options
3
Learn Explanation
4
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Choose the Best Answer

A

Decreasing unemployment

B

Increasing overall demand

C

Lowering inflation

D

Reducing transfer payments

Understanding the Answer

Let's break down why this is correct

Answer

Decreasing taxes allows people to keep more of their money, which is called disposable income. Similarly, increasing government spending puts more money into the economy, which can help stimulate growth and create jobs. When the government spends more, it can lead to more business activity and increased demand for goods and services. For example, if the government builds a new school, it not only creates jobs for construction workers but also provides a place for children to learn, benefiting the community. So, increasing government spending is to stimulating economic growth as decreasing taxes is to increasing disposable income.

Detailed Explanation

When the government spends more money, it helps people buy more things. Other options are incorrect because Some might think that government spending directly lowers unemployment; People may believe that more spending lowers prices.

Key Concepts

Fiscal Policy Actions
Recessionary Gap
Aggregate Demand
Topic

Recession and Fiscal Policy Actions

Difficulty

medium level question

Cognitive Level

understand

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