Which of the following policies would be advocated by proponents of stabilization policy when the economy is experiencing severe unemployment?
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

Proponents of stabilization policy would advocate for a reduction in tax rates when the economy is experiencing severe unemployment. This is because it would lead to an increase in consumer spending, causing a rise in aggregate demand, and thus, decreasing unemployment. A decrease in the money supply or in government purchases could have a contractionary effect on the economy, worsening the problem of unemployment. Therefore, the correct answer is B.

Which of the Following Policies Would Be Advocated by Proponents