Final answer:
Reduce unemployment, the best option is implementing training programs for new skills (option a), which helps the workforce adapt to high-demand sectors. Expansionary fiscal and monetary policies can stimulate overall buying power and economic activity, leading to job creation and lower unemployment rates.
Step-by-step explanation:
A primary solution to reduce the unemployment levels in a country where demand for luxury goods and services has decreased can include implementing measures such as expansionary fiscal policy and expansionary monetary policy. Among the options provided, the most effective would likely be implementing training programs for new skills (a). Training programs improve the workforce's adaptability and enable people to engage in different types of work, especially in high-demand sectors, which can reduce unemployment.
Increasing taxes on savings (b) is not a usual method to stimulate spending, as it might disincentivize investments and economic growth. Encouraging more saving (c) might provide economic stability, but it can also lead to decreased consumption and thereby could potentially increase unemployment. Subsidizing luxury goods industries (d) might not be effective if the underlying issue is a general decrease in demand for non-essential items.
Addressing cyclical unemployment that happens due to recessionary periods involves implementing policies that stimulate overall buying power in the economy. Governments can achieve this by enacting policies that lead to increased spending and lower taxes, promoting business growth and hiring. An increase in the money supply and lower interest rates as part of a monetary policy can also promote investment and economic activity.