Homework SourseWhich of the following methods of stimulating the economy pr
Which of the following methods of stimulating the economy provides the federal government with the greatest control over how the stimulation takes place. Possible answers, an increase in public expenditures, a decrease in income tax rate, a decrease in interest rates, an increase in investment incentives
Which of the following methods of stimulating the economy provides the federal government with the greatest control over how the stimulation takes place. Possible answers, an increase in public expenditures, a decrease in income tax rate, a decrease in interest rates, an increase in investment incentives
Solution
Correct Answer:
An increase in public expenditures
Explanation:
The federal government has maximum control upon the government spending that has full, direct and multiplier effect upon the economy. Here, the government spending is not subjected to the MPC and MPS as these factors play an important role when tax cut takes place to stimulate the economy. So, increase in public expenditure is the alternative to stimulate the economy with greatest control.
