What can a government do to increase demand in its economy ?
Correct answer: B. Cut taxes
- A. Budget for a surplus
- B. Cut taxes
- C. Encourage savings
- D. Reduce its expenditure
Explanation
Cutting taxes raises households' disposable income, allowing consumption and aggregate demand to increase. A surplus budget, greater saving or lower government expenditure would generally reduce demand.
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The economy is studied as a whole through national income, gross domestic product, inflation, unemployment, economic growth and business cycles. Coverage includes aggregate demand and supply, consumption and investment, money and banking, fiscal and monetary policy, exchange rates and balance of payments, which distinguishes macroeconomics from the study of individual markets.
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