Cassiopeia is a country facing an acute financial crisis. Coupled with a negative growth? rate, the rate of inflation in the economy has increased to almost 12 percent. The government of Cassiopeia has recently appointed a panel of experts to suggest suitable fiscal measures. Ronald? Boyle, a member of the National Trade Union in? Cassiopeia, feels that the best policy on the part of the government would be to announce an income tax rebate in the current year.? However, Danny? Cox, an? economist, feels that income tax rebates will only reduce government revenue. According to? him, a substantial increase in aggregate demand can only result from government investment in real assets.
Which of the following is most supported by the information given in the? question?
A. The level of private sector spending on real assets in Cassiopeia has traditionally been low.
B. Both Ronald and Danny believe that an expansionary fiscal policy is always more effective than an expansionary monetary policy.
C. The government of Cassiopeia is currently running a budget surplus.
D. The marginal propensity to consume in Cassiopeia is high.
E. Irrespective of what policy measure the government implements to combat the? crisis, inflation in Cassiopeia is likely to increase further.