A government might want to increase aggregate demand to:
A) close an inflationary gap.
B) close a recessionary gap.
C) reduce prices.
D) reduce employment.

Question

Quizplus · Accepted Answer

Increasing aggregate demand would help to close a recessionary gap, which is a situation where the economy is producing below its potential and unemployment is high. By injecting more spending into the economy, the government can encourage businesses to hire more workers and increase production, which ultimately leads to increased economic output and employment.

A Government Might Want to Increase Aggregate Demand To