看不懂这题

问题如下：

Question Among the listed fiscal policy measures, which one is most likely to have a contractionary effect?

选项：

A.

Raising tax rates while curbing government spending.

B.

Reducing tax rates while boosting government spending.

C.Slashing tax rates and trimming government spending.

解释：

Solution

1. Correct, as elevating tax rates coupled with a reduction in government spending typifies a contractionary fiscal approach. Such a strategy is deployed when the economy is operating near full employment, and there's an accelerated rise in wages and prices. By reducing government expenditure and increasing taxes, aggregate demand is dampened, leading to a slowdown in economic activity.
2. Incorrect, given that trimming tax rates and enhancing government expenditure usually results in a budgetary deficit, characterizing an expansionary policy. Expansionary measures can manifest in multiple ways, such as indirect tax reductions to diminish prices and elevate real incomes, stimulating consumer spending. A cut in corporation taxes can enhance company profits, potentially augmenting capital investments. Tax reductions for personal savings might bolster disposable income for savers, encouraging consumer spending. Further, augmenting public expenditure on infrastructural and social projects, like schools or hospitals, could stimulate personal incomes, driving up aggregate demand. On the contrary, an expanding budget surplus implies a contractionary fiscal stance, whereas a ballooning deficit suggests expansionary actions.
3. Incorrect, since a tax cut is expansionary by nature, whereas reduced government spending is contractionary. In the absence of data on the relative scales of these changes, the net effect—whether expansionary or contractionary—remains ambiguous. As mentioned before, reducing indirect taxes, corporation taxes, or taxes on personal savings can invigorate consumer and business spending, whereas heightened government spending on public infrastructure and social projects amplifies aggregate demand. Nonetheless, it's important to note that elevating (and not diminishing) government spending is expansionary. A swelling budget surplus suggests a contractionary approach, while a growing deficit implies expansionary undertakings.

Fiscal Policy

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