If the objective of government policy during a recession is to increase aggregate demand, then it should

Question

Quizplus · Accepted Answer

Increasing government spending can directly increase aggregate demand by injecting more money into the economy, creating jobs, and increasing consumer spending. Lowering income taxes or increasing government transfers can also increase aggregate demand, but not as directly as increased government spending. Decreasing government spending can have the opposite effect, as it reduces the amount of money in the economy and can lead to further contraction.

If the Objective of Government Policy During a Recession Is