Suppose the economy has a high level of unemployment and a low level of aggregate output. Which of the following policies could the government implement to alleviate these conditions?
A)a contractionary fiscal policy that increases tax rates
B)an expansionary fiscal policy that increases tax rates
C)a contractionary fiscal policy that increases government purchases
D)automatic fiscal stabilizers
E)an expansionary fiscal policy that increases government purchases

Question

Quizplus · Accepted Answer

An expansionary fiscal policy that increases government purchases would increase aggregate demand, leading to an increase in output and potentially a decrease in unemployment. The other options would either decrease aggregate demand (choice A and B) or have little impact (choice C and D).

Suppose the Economy Has a High Level of Unemployment and a Low