Multiple Choice
The Chancellor of the Exchequer is concerned that the level of aggregate demand is too high and that this will cause inflation. He feels that it is necessary to reduce demand by £5 billion. The MPC is 8. Which of the following would be the best thing to do?
A) Increase taxes by £5 billion.
B) Reduce government spending by £1 billion.
C) Increase taxes by £1 billion.
D) Reduce government spending by £5 billion.
Correct Answer:
Verified
Correct Answer:
Verified
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