Which of the Following Statements About Fiscal Policy Is the Best

Multiple Choice

Which of the following statements about fiscal policy is the best description of "fine tuning"?

A) The government increases its spending to reduce an inflationary gap.
B) The government cuts taxes to remove a large and persistent recessionary gap.
C) The government continuously alters its spending and taxing plans to hold real GDP at potential.
D) The government decreases tax rates to decrease an inflationary gap.
E) The government uses automatic stabilizers to reduce any output gaps.