Question

Which of the following policies would be most effective to control inflation?

An increase in government spending to shift aggregate demand to the right.

A decrease in government spending to shift aggregate demand to the left.

An increase in taxes to shift aggregate supply to the left.

None of the above would reduce inflation.

Answer 1

Answer: A decreased government spending to shift aggregate demand to the left

An increase in government spending will shift the AD to write an actually make inflation worse

An increase in taxes shifts AS to the left this will have the effective increasing inflation rather than controlling it

A decrease in government spending with shifts at the AD to the left and upward slopeing AS curve equilibrium at a lower price level and thereby reducing inflation