Question

Country Q has noticed a rapid increase in their unemployment rate and a sharp decline in their GDP.

What should policy makers focus on to help balance these economic indicators?

Responses

attempting to trade with other nations to increase production and create new jobs
attempting to trade with other nations to increase production and create new jobs

decreasing production and limiting government spending until demand increases
decreasing production and limiting government spending until demand increases

implementing controls on wages, forcing employers to pay a minimum wage
implementing controls on wages, forcing employers to pay a minimum wage

increasing the money supply so that consumers have more money to purchase goods
increasing the money supply so that consumers have more money to purchase goods
Skip pagination
Assignment


6 of 7

Answer 1

increasing the money supply so that consumers have more money to purchase goods

Reason: Rising unemployment and falling GDP indicate a demand shortfall (a recession). Expansionary monetary policy (or fiscal stimulus) boosts aggregate demand, spurring consumption and investment, which raises output and reduces unemployment. The other choices (cutting government spending, imposing wage controls/minimums that may raise labor costs, or relying solely on trade) would be less effective or could worsen the downturn.