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Country Q has experienced a rapid increase in its unemployment rate and a sharp decline in its GDP.
What might policymakers do in the face of these economic indicators?
encourage a decrease in purchasing until employment figures increase
try to trade with other nations to increase production and create new jobs
increase taxes so the government has more money to spend
implement controls on wages, forcing employers to pay higher wages
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Try to trade with other nations to increase production and create new jobs.
Explanation: the other options would be contractionary or counterproductive — cutting purchasing lowers demand, raising taxes reduces private spending, and forcing higher wages can raise firms' costs and worsen unemployment. In practice policymakers would more likely use expansionary fiscal and monetary measures (e.g., lower interest rates, increased government spending or tax cuts, targeted job programs and benefits) and promote exports/foreign demand to boost GDP and employment.
Explanation: the other options would be contractionary or counterproductive — cutting purchasing lowers demand, raising taxes reduces private spending, and forcing higher wages can raise firms' costs and worsen unemployment. In practice policymakers would more likely use expansionary fiscal and monetary measures (e.g., lower interest rates, increased government spending or tax cuts, targeted job programs and benefits) and promote exports/foreign demand to boost GDP and employment.
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