Question

Suppose most economists agree that the target rate of unemployment is between 4 and 7 percent. If the actual unemployment rate is 11 percent, then most economists would agree that:______________.

Answer 1

Both expansionary monetary and fiscal policies can be used

Step-by-step explanation:

When unemployment rate is higher than the tolerated level, the government must stimulate aggregate demand by increasing the purchasing power of the citizens. The disposable income can be increased by using any of either expansionary fiscal policy which include massive government expenditure or the reduction in income tax, or monetary policy tools, the monetary authority can use expansionary monetary policy by reducing the cost of money (i.e. interest rate), increasing money supply, e.t.c.