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Describe three fiscal options that can be used by the government to solve the problems of diminished output.

Describe three fiscal options that can be used by the government to solve the problems of diminished output.

Answers

Simon
• Tax reduction. Reduction of taxes can shift the aggregate demand curve to the right. A tax must be larger than the proposed government spending to achieve the same amount of an increase I the aggregate demand.
• Increased government spending. An increase in government spending will shift an economy aggregate demand curve to the right hence an increase I output and increase levels of economic activities in the country.
• Combined increase in government spending and tax reductions. The government can combine spending increases and tax reductions to produce the desired initial increase in spending and eventually increase in aggregate demand and real gross domestic product.
skilled writter answered the question on May 3, 2018 at 17:26

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