Which of the following policies would someone who wants the government to follow an active stabilization policy recommend when the economy is experiencing unemployment above the natural rate?
A)decreasing the money supply
B)increasing government expenditures
C)increasing taxes
D)reducing the government deficit

Question

Quizplus · Accepted Answer

Someone who wants the government to follow an active stabilization policy would recommend increasing government expenditures during a recession or when the economy is experiencing unemployment above the natural rate. This policy is often referred to as expansionary fiscal policy and is aimed at increasing demand and stimulating economic growth. Decreasing the money supply (A) and increasing taxes (C) are contractionary policies that would reduce demand and can potentially worsen a recession. Reducing the government deficit (D) can also be contractionary, as it involves reducing government spending and can also worsen a recession.

Which of the Following Policies Would Someone Who Wants the Government