Post Utme Uniport 2025 Economics Question 16

Practice objective / multiple choice question 16 from the 2025 Post Utme Uniport Economics examination.

Post Utme Uniport 2025 Economics Objective / Multiple Choice
Question 16 POST_UTME_UNIPORT • 2025 • ECONOMICS • objective

The government of a country decides to implement a policy of reducing the budget deficit by increa\sing taxes. However, this policy may have an unint\ended consequence of reducing aggregate demand and leading to a recession. U\sing the IS-LM model, explain how this policy would affect the economy.

Answer Options

A. The policy would lead to a decrease in interest rates and an increase in investment, resulting in an increase in aggregate demand.
B. The policy would lead to a decrease in interest rates and a decrease in investment, resulting in a decrease in aggregate demand.
Correct Answer C. The policy would lead to an increase in interest rates and a decrease in investment, resulting in a decrease in aggregate demand.
D. The policy would lead to an increase in interest rates and an increase in investment, resulting in an increase in aggregate demand.
Correct Answer
C
Correct Option:
The policy would lead to an increase in interest rates and a decrease in investment, resulting in a decrease in aggregate demand.

About This Question

This is Post Utme Uniport 2025 Economics Question 16. It is one of the objective questions from the 2025 Post Utme Uniport Economics examination.

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