Suppose that consumer spending is expected to decrease in the near future.?

Question

Suppose that consumer spending is expected to decrease in the near future. If output is at potential output, which of the following policies is most appropriate?

A. An increase in government spending.

B. An increase in taxes.

C. A reduction in government spending.

D. No change in taxes or government spending.

Answer 1

A.An increase in government spending

this will offset the fall in consumer spending and keep output level at the potential rather than dropping from that levekl due to reduced consumer spending.

Answer 2

The answer is ".An increase in government spending."