Question

How would the government most likely respond to a decrease in consumer spending? A. By decreasing the money supply B. By raising income taxes C. By adding to its discretionary spending budget D. By raising interest rates

Answer 1

C. By adding to its discretionary spending budget.

Answer 2

A.The government has the power to print more money hence can increase the money supply.

B.The government has the power to reduce and increase taxes to respond to decrease in consumer spending the government can decrease taxes which will increase disposable income leaving households with more money.

C.Governments can finance budget deficit by borrowing in financial market.

D.Government has the power to tax which give greater control over its revenue.