If the economy was operating below full employment, it could return to full employment
A) by itself, through falling wages and prices.
B) through increases in government spending or tax cuts.
C) through open market purchases.
D) all of the above

Question

Quizplus · Accepted Answer

Option A is valid, as falling wages and prices can increase the demand for goods and services, which could lead to an increase in employment. Option B is also valid, as government spending can create more job opportunities and tax cuts can increase the purchasing power of consumers, leading to an increase in demand for goods and services, and hence employment. Option C, open market purchases, can increase the money supply, which could lead to lower interest rates and an increase in investments and consumption, thus increasing employment. Therefore, all of the above options can help the economy return to full employment.

If the Economy Was Operating Below Full Employment, It Could