Final answer:
In response to unemployment caused by too little demand, the government would likely decrease interest rates as part of an expansionary monetary policy to stimulate economic activity and increase aggregate demand, thus potentially reducing unemployment.
Step-by-step explanation:
In the scenario where unemployment is caused by insufficient demand in the economy, the government is likely to implement an expansionary monetary policy to stimulate economic growth. This involves decreasing interest rates to make borrowing cheaper, which encourages spending and investment by businesses and consumers. As a result, aggregate demand increases, which can help reduce unemployment.
Given the options provided, the correct answer is A. Decrease Interest Rates. Lower interest rates can lead to increased investment and consumption, which elevates aggregate demand and potentially decreases unemployment. High interest rates could deter spending and borrowing, maintaining or worsening the unemployment situation. Therefore, in the face of recessionary pressures, the government would not choose to increase interest rates or keep them unchanged, and a progressive interest rate system is not a standard response to recession and unemployment.