Question
In: Economics
Governments often attempt to fight a recession by
Governments often attempt to fight a recession by
a) increasing spending and cutting taxes which shifts the aggregate supply curve to the right.
b) increasing spending and cutting taxes which shifts the aggregate demand curve to the right.
c) increasing spending and cutting taxes which shifts the aggregate demand curve to the left.
d) increasing taxes to increase the supply of loanable funds.
Solutions
Expert Solution
Answer:
Correct Option: B] increasing spending and cutting taxes which shifts the aggregate demand curve to the right.
Explanation:
The government often attempts to fight recession by increasing spending and cutting taxes which shifts the aggregate demand curve to the right.The increased government pending causes the unemployed to gain jobs by creating multiplier effect, then they will have more income to spend leading to a further increase in aggregate demand.
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