Question

Which of the following is an example of a fiscal policy appropriate to combat unemployment?

increasing government spending
contractionary fiscal policy
increasing interest rates
decreasing government transfers
increasing taxes

Answer 1

Increasing government spending is an example of an expansionary fiscal policy, which is appropriate to combat unemployment by stimulating economic activity and creating jobs.

Therefore, the correct answer is: option 'increasing government spending'.

Step-by-step explanation:

In economics and political science, fiscal policy is the use of government revenue collection and expenditure to influence a country's economy.

When the economy is facing high unemployment, particularly during a recession, an expansionary fiscal policy can be employed to stimulate economic activity.

This includes increasing government spending on things like infrastructure projects, education, and other public services, which can create jobs and increase overall demand in the economy.

There are three types of fiscal policy which are – neutral, contractionary, and expansionary. And ,the primary objective of the fiscal policy is to regulate the case of economic stability, full employment and stabilize the growth rate.