During the fall of 2007, the United States economy began a descent into deep rec

Question

During the fall of 2007, the United States economy began a descent into deep recession. As a result, the federal government and the Federal Reserve took action to stimulate economic growth. Which of the following would have been an appropriate fiscal policy? Choose one or more: A. the Federal Reserve increasing the money supply to reduce the interest rate B. the federal government spending more money to build more infrastructure C. the federal government providing tax refunds to many taxpayers D. the federal government increasing its regulation of banks E. the federal government beginning to close failing banks

Explanation / Answer

As the economy moved into recession, aggregate demand fell which brought down output and employment level. The appropriate fiscal policy should be policy aimed at increasing this aggregate demand. The appropriate fiscal policy measure would be option C, the federal government providing refunds to many taxpayers. This would increase the disposable income of the consumer and thus increased aggregate demand.

Related Questions

Navigate

• Browse (All)
• Browse D
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.