When inflation begins to climb to unacceptable levels in the economy, the government should:

A. use contractionary fiscal policy to shift aggregate demand to the right.

B. use contractionary fiscal policy to shift aggregate demand to the left.

C. use expansionary fiscal policy to shift aggregate demand to the right.

D. use expansionary fiscal policy to shift aggregate demand to the left.

Question

Cruz

Business

16 June, 23:16

When inflation begins to climb to unacceptable levels in the economy, the government should:

A. use contractionary fiscal policy to shift aggregate demand to the right.

B. use contractionary fiscal policy to shift aggregate demand to the left.

C. use expansionary fiscal policy to shift aggregate demand to the right.

D. use expansionary fiscal policy to shift aggregate demand to the left.

+5

Answers (1)

Know the Answer?

Georgia · Answer 1

The correct answer to the following question is option B) The government should use the contractionary fiscal policy to shift the aggregate demand to the left.

Explanation:

In the situation where inflation is rising at a fast speed in the economy, then government needs to use contractionary fiscal policy in which government will decrease their spending and increase the taxes in order to decrease the spending of people and the aggregate demand, which will then ultimately lead to shift in the aggregate demand towards the left.