If the government wants to reduce unemployment, it would use _____to shift the ______. automatic stabilizers; aggregate supply curve to the left contractionary fiscal policy; aggregate demand curve to the left contractionary fiscal policy; aggregate supply curve to the left expansionary fiscal policy; aggregate supply curve to the right expansionary fiscal policy; aggregate demand curve to the right
Question
If the government wants to reduce unemployment, it would use _____to shift the ______.
automatic stabilizers; aggregate supply curve to the left
contractionary fiscal policy; aggregate demand curve to the left
contractionary fiscal policy; aggregate supply curve to the left
expansionary fiscal policy; aggregate supply curve to the right
expansionary fiscal policy; aggregate demand curve to the right
Solution
The correct answer is "expansionary fiscal policy; aggregate demand curve to the right".
Here's why:
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The government uses fiscal policy to influence the economy. Fiscal policy includes government spending and taxation.
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If the government wants to reduce unemployment, it would use an expansionary fiscal policy. This policy involves increasing government spending or decreasing taxes to stimulate the economy.
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The goal of an expansionary fiscal policy is to increase aggregate demand. Aggregate demand is the total demand for goods and services within the economy.
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By increasing aggregate demand, businesses are likely to increase production to meet the higher demand. This increase in production often leads to an increase in employment, thus reducing unemployment.
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Therefore, an expansionary fiscal policy would shift the aggregate demand curve to the right, indicating an increase in aggregate demand.
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