Question

To change people's spending, the government can: Please choose the correct answer from the following choices, and then select the submit answer button. Answer choices
A) Alter its own spending, taxes, and/or the amount of money in circulation.
B) Alter taxes or the amount of money in circulation, but changing its own spending will have no effect.
C) Alter its own spending or the amount of money in circulation, but changing taxes will have no effect.
D) Alter its own spending or taxes, but changing the amount of money in circulation will have no effect.

Answer 1

Answer:

A) Alter its own spending, taxes, and/or the amount of money in circulation.

Explanation:

In situations of economic warming and inflation the government can act to influence citizens' spending to cool down economic activity to lower inflation. Inflation is a monetary phenomenon caused by excess currency in the economy. Thus, the government can reduce its spending, because it is an important player, which makes government consumption has a significant weight in economic warming. In addition, the government can take steps to curb citizen consumption through restrictive policies such as raising taxes. Finally, the government may sell government bonds to wipe out the monetary base. When the government sells bonds, people stop consuming at present to earn future income from public bonds. Thus, the government causes the money in circulation to decrease.