Final answer:
To reduce unemployment, the best option is buying government bonds in the open market and decreasing taxes. This approach is consistent with expansionary fiscal policy (lower taxes or increased government spending) and expansionary monetary policy (increase the money supply and lower interest rates), stimulating economic growth and reducing unemployment.
Step-by-step explanation:
The mix of monetary and fiscal policy that would reduce unemployment is the option of buying government bonds in the open market and decreasing taxes. This approach aligns with expansionary fiscal policy and expansionary monetary policy, which are designed to stimulate the economy during a recession and lead to a decrease in unemployment.
Expansionary fiscal policy is characterized by lower taxes or increased government spending, which can elevate aggregate demand, thus stimulating economic growth. Similarly, expansionary monetary policy involves increasing the money supply and lowering interest rates, actions typically executed through the buying of government bonds in the open market, encouraging more lending and spending.
In times of recession, these policies are crucial as they are utilized to bolster the economy's overall output and aid in reducing the unemployment rate. Hence, if the goal is to diminish unemployment, especially during a recession, the most effective option would be a combination of expansionary fiscal and monetary policies.