Asked by Lizbeth Garza on May 02, 2024
Verified
President Barack Obama and Congress cut taxes and raised government expenditures during the 2008 financial crisis. According to the aggregate supply and aggregate demand model, which of these policies would tend to reduce unemployment?
A) Both the tax cut and the increase in government expenditures
B) The tax cut but not the increase in government expenditures
C) The increase in government expenditures but not the tax cut
D) Neither the increase in government expenditures nor the tax cut
Aggregate Supply
The total supply of goods and services that firms in an economy plan on selling during a specific time period at various price levels.
Aggregate Demand
The comprehensive market demand for all types of goods and services within an economy, pegged at a certain price level throughout a specific time period.
- Acquire knowledge about the role of fiscal and monetary policies in recession mitigation.
Verified Answer
ZK
Zybrea KnightMay 04, 2024
Final Answer :
A
Explanation :
Both the tax cut and the increase in government expenditures would tend to reduce unemployment by increasing aggregate demand. Tax cuts increase disposable income for consumers, leading to higher consumption, while increased government expenditures directly boost demand for goods and services.
Learning Objectives
- Acquire knowledge about the role of fiscal and monetary policies in recession mitigation.
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