Which of the following policies would stabilization policy activists support when the economy is experiencing unemployment above the natural rate?
A)a decrease in the money supply
B)a reduction in tax rates
C)a decrease in government purchases
D)None of the above is correct.

Question

Quizplus · Accepted Answer

Stabilization policy activists would support a reduction in tax rates during a period of unemployment above the natural rate, as this would stimulate spending and economic activity. A decrease in the money supply would likely worsen the unemployment situation, as it would make it more difficult for consumers and businesses to access credit. A decrease in government purchases could potentially reduce aggregate demand and worsen the unemployment situation. Therefore, choice B is the best option.

Which of the Following Policies Would Stabilization Policy Activists Support