Question

How can the federal government use discretionary fiscal policy to stimulate the​ economy?

An economy is experiencing a recessionary gap. The government can​ ______.
A. increase expenditure or cut taxes to increase​ short-run aggregate supply
B. increase expenditure or cut taxes to increase aggregate demand
C. raise taxes to decrease​ long-run aggregate supply
D. raise taxes or decrease the quantity of money to decrease​ long-run aggregate supply

Answer 1

A. increase expenditure or cut taxes to increase​ short-run aggregate supply

Step-by-step explanation:

• The discretionary fiscal policy the government raised the feeds funds through the open market operations and this policy can reduce the taxes and increase the feds expenditures to enact the monetary fiscal policy.