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Which policy is typically used to reduce unemployment?

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Question: Which policy is typically used to reduce unemployment?

Options:

  1. Tight monetary policy
  2. Expansionary fiscal policy
  3. Contractionary fiscal policy
  4. Deflationary policy

Correct Answer: Expansionary fiscal policy

Solution: 

Expansionary fiscal policy, which involves increasing government spending and/or decreasing taxes, is used to stimulate the economy and reduce unemployment.

Which policy is typically used to reduce unemployment?

Practice Questions

Q1
Which policy is typically used to reduce unemployment?
  1. Tight monetary policy
  2. Expansionary fiscal policy
  3. Contractionary fiscal policy
  4. Deflationary policy

Questions & Step-by-Step Solutions

Which policy is typically used to reduce unemployment?
  • Step 1: Understand what unemployment means. It is when people who want to work cannot find jobs.
  • Step 2: Learn about fiscal policy. This is how the government uses its money to influence the economy.
  • Step 3: Know the two main parts of expansionary fiscal policy: increasing government spending and decreasing taxes.
  • Step 4: Realize that increasing government spending means the government buys more goods and services, which creates jobs.
  • Step 5: Understand that decreasing taxes means people have more money to spend, which can lead to businesses hiring more workers.
  • Step 6: Conclude that by using expansionary fiscal policy, the government can help stimulate the economy and reduce unemployment.
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