Answer to Question #137103 in Macroeconomics for Dane Botha

Question

In the event of high levels of inflation, the government can:
(a) Implement a restrictive fiscal policy by raising interest rates;

(b) Implement a restrictive fiscal policy by decreasing interest rates;

(c) Implement a restrictive fiscal policy by raising tax rates and decreasing government expenditure;

(d) Implement a restrictive fiscal policy by decreasing tax rates and increasing interest rates.

Answer 1

(c) Implement a restrictive fiscal policy by raising tax rates and decreasing government expenditure;