Which of the following policies would be most effective to control inflation? a) An increase in government spending to shift aggregate demand to the right. b) A decrease in government spending to shift aggregate demand to the left. c) An increase in taxes to shift aggregate supply to the left. d) None of the above would reduce inflation.

Question

Social Studies

Monica Short

18 March, 11:07

Which of the following policies would be most effective to control inflation? a) An increase in government spending to shift aggregate demand to the right. b) A decrease in government spending to shift aggregate demand to the left. c) An increase in taxes to shift aggregate supply to the left. d) None of the above would reduce inflation.

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Answers (1)

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Bray · Answer 1

The correct answer is option b.

Explanation:

Inflation refers to the situation when there is a continuous and sustained increase in the general price level.

The government can reduce inflation by either increasing taxes or reducing government spending. The reduction in government spending would cause the aggregate demand to shift to the left. This will cause the price to decline.