Exhibit 12-4
-Which of the following sets of policies would unquestionably move the economy illustrated in Exhibit 12-4 to full employment?

Question

Exhibit 12-4 
-Which of the following sets of policies would unquestionably move the economy illustrated in Exhibit 12-4 to full employment?

Quizplus · Accepted Answer

To achieve full employment, policies should help increase aggregate demand. An increase in government purchases will increase AD. Decreasing taxes will increase disposable income and hence consumption, which will also lead to an increase in AD. Finally, increasing transfer payments will also increase disposable income and hence consumption, which will once again lead to an increase in AD. Thus, option C is the correct answer.

Exhibit 12-4 -Which of the Following Sets of Policies Would Unquestionably Move