If the government wants to engage in fiscal policy to close a recessionary gap,it should

Question

Quizplus · Accepted Answer

To close a recessionary gap, the government should increase government spending in order to increase aggregate demand. This will increase the overall demand for goods and services, which will in turn increase production and ultimately reduce the gap. Decreasing government spending or increasing taxes would decrease aggregate demand, worsening the recessionary gap. Increasing government spending helps to increase aggregate demand which can stimulate economic growth and improve employment rates, contributing to the economy's recovery.

If the Government Wants to Engage in Fiscal Policy to Close