Question

The government of the United States is worried that the inflation rate is too high. What fiscal policy would the US government adopt to reduce the inflation rate?
Group of answer choices

decrease government spending

lower the income tax rate

lower the federal interest rate

invest in public works projects

Answer 1

Answer: decrease government spending

Explanation:

Since government spending leads to employment generation and business activity which in turn increases incomes and spending. A decrease in government spending will keep demand and consequently inflation in check.