For the following questions,use the diagram below:
Figure 34-7.
-Refer to Figure 34-7.If the economy is at point b,a policy to restore full employment would be
A)an increase in the money supply.
B)a decrease in government purchases.
C)an increase in taxes.
D)All of the above are correct.

Question

For the following questions,use the diagram below:
Figure 34-7. 
-Refer to Figure 34-7.If the economy is at point b,a policy to restore full employment would be
A)an increase in the money supply. 
B)a decrease in government purchases. 
C)an increase in taxes. 
D)All of the above are correct.

Quizplus · Accepted Answer

Point b is below the full employment level of output, so to restore full employment, the economy needs to expand. One way to achieve this is by increasing the money supply, which can lead to lower interest rates and higher investment and consumption spending. Decreasing government purchases or increasing taxes could have a contractionary effect on the economy and make it more difficult to achieve full employment.

For the Following Questions,use the Diagram Below