Question

Which of the following fiscal policies would most likely reduce unemployment?

Answer 1

The answer would be "A. Increasing funding for local grants." I remember this from my quiz in economics from last year, and I hope this helps you. :)

Answer 2

A fiscal policy that would most likely reduce unemployment is: increasing funding for local grants.

A fiscal policy has to do with the decisions the government makes regarding government spending. While, a monetary policy has to do with the amount of money that will circulate in an economy. For instance, lowering reserve requirements would be an expansionary monetary policy. While, increasing funding for local grants would be an expansionary fiscal policy. In other words, the government spending would increase. Increasing funding for local grants, would increase people's consumption and therefore the aggregate demand. Once the demand is increased, producers would need more workers in order to increase the supply, and as a result unemployment rates would decrease.