If unemployment is the most significant problem in the economy, which of the following actions would be an appropriate fiscal policy response?

Question

Quizplus · Accepted Answer

Decreasing taxes can increase consumer spending and business investment, which can lead to an increase in aggregate demand and potentially lead to job creation. Decreasing government purchases and decreasing the federal deficit could lead to a contraction in aggregate demand, which could potentially worsen the unemployment problem. Therefore, decreasing taxes would be the most appropriate fiscal policy response to address unemployment.

If Unemployment Is the Most Significant Problem in the Economy