Question

based on an improving gdp report, unemployment decreasing, and inflation rising, what should be the proper fiscal policy response?
raising taxes and cutting spending
lowering taxes and increasing spending
cutting government employment
purchasing government securities

Explanation:

The economic indicators (improving GDP, falling unemployment, rising inflation) show the economy is overheating. Contractionary fiscal policy is needed to reduce aggregate demand and curb inflation. Raising taxes reduces household/business disposable income, and cutting government spending directly lowers aggregate demand. Lowering taxes/increasing spending is expansionary, cutting government employment is a narrow measure not a full fiscal response, and purchasing securities is monetary policy, not fiscal.

Answer:

raising taxes and cutting spending