You are a member of Congress in 2007-2009 when the economy is in a recessionary gap.If your goal is to achieve full employment, you should vote for
A)decreased government purchases, increased taxes, and a cut in transfer payments.
B)a balanced federal budget.
C)increased government purchases, decreased taxes, and an increase in transfer payments.
D)increased government purchases and transfer payments, and an equal increase in taxes.

Question

Quizplus · Accepted Answer

When the economy is in a recessionary gap, it means that there is a decrease in output and employment. To achieve full employment, the government needs to increase aggregate demand through fiscal policy. Option C is the best choice because increasing government purchases will directly increase aggregate demand, decreasing taxes will increase disposable income and therefore consumption, and increasing transfer payments will increase disposable income and therefore consumption as well. This combination of policies will help to stimulate the economy and ultimately lead to full employment. Option A is not a good choice because decreasing government purchases and cutting transfer payments will decrease aggregate demand, worsening the recession. Option B may lead to a balanced budget, but it does not directly address the recessionary gap. Option D may also be effective, but only if the increase in government purchases and transfer payments is larger than the increase in taxes, which is not specified.

You Are a Member of Congress in 2007-2009 When the Economy