If aggregate output is below the natural rate level,advocates of discretionary policy would recommend that the government
A)do nothing.
B)try to eliminate the high unemployment by attempting to shift the aggregate supply curve to the right.
C)try to eliminate the high unemployment by attempting to shift the aggregate demand curve to the right.
D)try to eliminate the high unemployment by attempting to shift the aggregate demand curve to the left.

Question

Quizplus · Accepted Answer

Advocates of discretionary policy believe that the government should actively intervene in the economy to stabilize output and employment. When aggregate output is below the natural rate level, there is typically high unemployment, which can be addressed by attempting to shift the aggregate demand curve to the right. This can be done through expansionary fiscal or monetary policy, such as increasing government spending, cutting taxes, or reducing interest rates. This will lead to an increase in aggregate demand, which will increase output and reduce unemployment towards the natural rate level. Therefore, choice C is the best recommendation for discretionary policy advocates in this scenario.

If Aggregate Output Is Below the Natural Rate Level,advocates of Discretionary