Exhibit 12-2
-Which of the following sets of policies would unquestionably move the economy illustrated in Exhibit 12-2 to full employment?

Question

Exhibit 12-2 
-Which of the following sets of policies would unquestionably move the economy illustrated in Exhibit 12-2 to full employment?

Quizplus · Accepted Answer

An increase in government purchases will lead to an increase in aggregate demand, as it will increase the demand for goods and services. A decrease in taxes will increase disposable income, and thus consumption, leading to an increase in aggregate demand. An increase in transfer payments, such as social security or unemployment benefits, will also increase disposable income and consumption, leading to an increase in aggregate demand. Together, these three policies will increase aggregate demand enough to bring the economy to full employment. Therefore, option C is the correct choice.

Exhibit 12-2 -Which of the Following Sets of Policies Would Unquestionably Move