If the economy is experiencing a recessionary gap and the government wants to speed up the adjustment to full employment,the government should

Question

Quizplus · Accepted Answer

A recessionary gap indicates that the economy is not producing at its full potential, which means there is room for growth. To speed up the adjustment to full employment, the government should increase aggregate demand. The best way to achieve this is through expansionary fiscal policy, such as cutting taxes or raising spending. These measures increase consumer and business spending, which leads to an increase in aggregate demand, ultimately helping to close the recessionary gap. Cutting spending or raising taxes would have the opposite effect, reducing aggregate demand and making the adjustment to full employment slower.

If the Economy Is Experiencing a Recessionary Gap and the Government