President Barrack 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

Question

Quizplus · Accepted Answer

According to the aggregate supply and aggregate demand model, both tax cuts and increases in government expenditures can stimulate aggregate demand and increase economic growth, leading to a reduction in unemployment. Cutting taxes puts more money in people's pockets, which they can then spend or invest, increasing consumption and investment expenditures. Similarly, increasing government expenditures creates jobs and increases demand for goods and services, further stimulating economic growth. Hence, both policies would tend to reduce unemployment.

President Barrack Obama and Congress Cut Taxes and Raised Government