The economy is doing well but prices for goods and services are increasing at a faster pace. Determine the course of action that could be taken to help the economy by slowing down the rate of price increases for goods and services.(1 point)

Question

Responses

An expansionary fiscal policy involving increases to corporate tax rates and increased payments to people who receive entitlements could be used to help with inflation.
An expansionary fiscal policy involving increases to corporate tax rates and increased payments to people who receive entitlements could be used to help with inflation.

A contractionary fiscal policy involving increases in individual and corporate tax rates as well as cuts to subsidies and the number of government employees would help to slow inflation.
A contractionary fiscal policy involving increases in individual and corporate tax rates as well as cuts to subsidies and the number of government employees would help to slow inflation.

A contractionary fiscal policy involving decreases to individual and corporate tax rates as well as infrastructure projects and subsidies could be used to weaken the economy.
A contractionary fiscal policy involving decreases to individual and corporate tax rates as well as infrastructure projects and subsidies could be used to weaken the economy.

An expansionary fiscal policy involving cuts to individual tax rates and increased investments in infrastructure could be used to strengthen the economy.

Answer 1

To help with inflation, the best course of action would be:

A contractionary fiscal policy involving increases in individual and corporate tax rates as well as cuts to subsidies and the number of government employees would help to slow inflation.

Contractionary fiscal policy reduces overall demand in the economy, which can help slow down the rate of price increases for goods and services. By increasing taxes and cutting government spending, it can help to reduce inflationary pressures.