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What should the government do to government spending to reduce unemployment caused by too little Aggregate Demand (AD)?

A. Increase Government Spending
B. Decrease Government Spending
C. Keep Government Spending Unchanged
D. Implement Austerity Measures

User Tasia
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Final answer:

To relieve inflationary pressures caused by an excessive aggregate expenditure, the government should consider decreasing government spending and implementing austerity measures.

Step-by-step explanation:

When aggregate expenditure is greater than potential GDP and there is inflationary pressure, the government can use contractionary fiscal policy to reduce aggregate demand and relieve inflationary pressures.

This can be achieved through a combination of decreasing government spending and increasing taxes.

By reducing government spending, the government can decrease the overall demand in the economy, which can help prevent excessive inflation.

Implementing austerity measures, such as reducing government spending, can also be effective in reducing inflationary pressures.

User Hernanemartinez
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