Answer:
e) Increase personal income taxes and sell securities bonds.
Step-by-step explanation:
Here is the complete question with option: If inflation increased to 4% and unemployment was listed at 8%, which of the following policies would an economist most likely recommend using?
a) Sell bonds and decrease personal income taxes.
b) Decrease funding for road projects and decrease the discount road.
c) Decrease the reserve requirement and buy bonds.
d) increase defence spending and increase the discount rate.
e) Increase personal Income taxes and sell securities bonds.
As per Phillips curve, unemployment has inverse relationship with the rate of inflation. Therefore, if personal income taxes increases, the rate of inflation will be reduced and selling securities bonds will generate income for Government, which will help to increase the investment and it will help to reduce unemployment.