Which of the following policies would be advocated by proponents of stabilization policy when the economy is experiencing severe unemployment?
A)a decrease in the money supply
B)an increase in tax rates
C)an increase in government purchases
D)an increase in interest rates.

Question

Quizplus · Accepted Answer

Proponents of stabilization policy would advocate for an increase in government purchases when the economy is experiencing severe unemployment. This is because an increase in government spending can lead to an increase in aggregate demand, which can in turn create more jobs and reduce unemployment. Options A, B, and D would all likely have contractionary effects on the economy and could worsen unemployment.

Which of the Following Policies Would Be Advocated by Proponents