Which of the following raises domestic prices only when demand is relatively low?
a. Domestic subsidies
b. Lump sum tariff
c. Excise tariff
d. Lump sum tariff and excise tariff
Aggregate Demand And Prices:
As per the theory stated by several modern economists, the involvement of the government administration in an economy is both inevitable and determinant of the state of Economic variables been prevailing in the economy.
Answer and Explanation:
The correct option is option A.
In economics, the domestic subsidy is a term which denotes the monetary or non-monetary assistance being provided by the government especially to the marginalised section of the society. Therefore during times when the aggregate domestic demand is low then providing subsidies to the domestic consumers by the government might result in an increase in the inflationary pressures been prevailing in the economy.
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from Economics 102: MacroeconomicsChapter 7 / Lesson 3