When recessions are the result of slowing growth in potential output, the government's best policy is to:
A)increase aggregate demand.
B)decrease aggregate supply.
C)promote saving and investment.
D)reduce government spending.

Question

Quizplus · Accepted Answer

When a recession results from slowing potential output growth, the government should try to promote growth through savings, investment and human capital formation.

When Recessions Are the Result of Slowing Growth in Potential