Question

Which of the following fiscal policies has the best potential for reducing unemployment? raising taxes on small business selling more government securities increasing funding for business grants lowering spending on new infrastructure projects

Answer 1

Expansionary fiscal policy, which involves increasing government spending or reducing taxes, has the best potential for reducing unemployment.

Step-by-step explanation:

Expansionary fiscal policy, which involves increasing government spending or reducing taxes, has the best potential for reducing unemployment. By increasing government spending, more money is injected into the economy, which can lead to job creation and a decrease in unemployment. Similarly, reducing taxes can provide businesses with more resources to expand and hire more employees, also reducing unemployment.

Answer 2

Increasing funding for business grants would be a form of expansionary fiscal policy and has the best potential for reducing unemployment, as it gives businesses capital to invest and create jobs.

Step-by-step explanation:

To determine which fiscal policy has the best potential for reducing unemployment, we should consider expansionary fiscal policies that are effective during recessions. Expansionary fiscal policies are designed to increase aggregate demand, thereby stimulating economic output and reducing unemployment. These policies include measures such as lowering taxes or increasing government spending.

Among the options provided, increasing funding for business grants has the potential to directly stimulate economic activity by providing businesses with the capital they need to invest and create jobs, thereby reducing unemployment. Conversely, raising taxes on small businesses tends to have the opposite effect, as it reduces their available resources for investment and growth. Selling more government securities is a tool often used in monetary policy rather than fiscal policy, and while it can affect the economy, it does not have a direct impact on job creation as fiscal measures do. Lowering spending on new infrastructure projects is a form of contractionary fiscal policy, which is generally not conducive to reducing unemployment during a recession.

Therefore, increasing funding for business grants is the approach most aligned with expansionary fiscal policy, aiming to boost economic growth and reduce unemployment.