Which of the following may the government choose to combine in order to reduce aggregate demand and check inflation?

Question

Multiple select question.

Tax increases

Tax decreases

Spending increases

Spending decreases

Answer 1

To reduce aggregate demand and check inflation, the government may choose to combine the following options:

1. Tax increases - By increasing taxes, disposable income decreases, leading to reduced consumer spending, which can lower aggregate demand.

2. Spending decreases - By reducing government spending, overall demand in the economy can be decreased, which also helps to control inflation.

So, the correct selections are Tax increases and Spending decreases.