Policy makers who believe that the costs of unemployment are very high will tend to favor which of the following during a recessionary gap?

Question

Quizplus · Accepted Answer

Policy makers who believe that the costs of unemployment are very high would want to take strong measures to combat a recessionary gap. Both monetary stimulus (lowering interest rates and increasing money supply) and fiscal stimulus (increasing government spending and/or cutting taxes) would be necessary to boost aggregate demand and create jobs. Fiscal and monetary tightness (reducing government spending and increasing interest rates) would only worsen the recessionary gap and increase unemployment.

Policy Makers Who Believe That the Costs of Unemployment Are