Government may be able to increase equilibrium real GDP and reduce the unemployment rate by:

Question

Quizplus · Accepted Answer

All the options listed can potentially increase equilibrium real GDP and reduce the unemployment rate. A) Increasing government purchases directly increases aggregate demand. B) Cutting taxes increases disposable income, leading to higher consumption and investment. C) Increasing both purchases and taxes by the same amount can still stimulate the economy if the multiplier effect of government spending is larger than the multiplier effect of taxes.

Government May Be Able to Increase Equilibrium Real GDP and Reduce