Suppose the U.S. economy finds itself in a recession after a recent financial cr

Question

Suppose the U.S. economy finds itself in a recession after a recent financial crisis and series of unfortunate international events. If the government wants to stabilize the economy by employing fiscal policy, which of the following policy combinations would do the most to shift AD in the right direction?

A:Increase taxes and increase government spending.

B: Decrease taxes and increase government spending.

C: Increase taxes and decrease government spending.

D: Decrease taxes and decrease government spending.

Explanation / Answer

Decrease taxes and increase government spending

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