Question

To take advantage of the multiplier effect, the federal government may use the following types of injections (select all that apply)

a. decreasing income taxes
b. increasing income taxes
c. increasing government spending on infrastructure projects (such as bridges)
d. decreasing government spending to bring down the deficit
e. encouraging more households to increase their personal savings rate
f. providing a tax rebate check to households, and encourage them to spend all of it

Answer 1

To use the multiplier effect for stimulating economic growth, the federal government may decrease income taxes, increase spending on infrastructure.

Step-by-step explanation:

To take advantage of the multiplier effect, the federal government may use certain types of injections into the economy. The correct options that can lead to an increase in aggregate demand and potentially stimulate economic growth are: Decreasing income taxes -

This increases consumers' disposable income, allowing them to spend more and stimulate the economy. Increasing government spending on infrastructure projects such as bridges - This creates jobs and injects money directly into the economy. Providing a tax rebate check to households, and encouraging them to spend all of it -

This directly increases consumption. The other options listed, such as increasing income taxes, decreasing government spending, and encouraging more household savings, typically lead to a reduction in aggregate demand and are contrary to the goals of exploiting the multiplier effect.