When a recessionary gap exists,what should the government do to address the situation?

Question

Quizplus · Accepted Answer

When there is a recessionary gap, it means that the aggregate demand is lower than the potential output, resulting in high unemployment and low economic growth. To address this, the government should use expansionary fiscal policy, which involves increasing government spending and/or decreasing taxes. This will increase the aggregate demand and stimulate economic growth. Therefore, choice C, which suggests that the government should increase its own spending or decrease tax rates, is the best option.

When a Recessionary Gap Exists,what Should the Government Do to Address