Which policy 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 when the economy is experiencing unemployment above the natural rate. This is because higher government expenditures mean more money flows into the economy, increasing demand and creating more jobs. A decrease in money supply, increasing taxes, or reducing the government deficit would have the opposite effect, slowing the economy further and increasing unemployment.

Which Policy Would Someone Who Wants the Government to Follow