In Figure 9.8,if full-employment income is produced at $400 billion,which of the following can alleviate a recession?
A)An increase in government spending.
B)An increase in taxes.
C)An increase in interest rates.
D)An increase in saving.

Question

In Figure 9.8,if full-employment income is produced at $400 billion,which of the following can alleviate a recession? 
A)An increase in government spending. 
B)An increase in taxes. 
C)An increase in interest rates. 
D)An increase in saving.

Quizplus · Accepted Answer

An increase in government spending can lead to an increase in aggregate demand, which can help alleviate a recession by increasing output and employment levels. The other choices (B, C, and D) would likely have the opposite effect and could potentially worsen the recession.