Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
It decreases unemployment and increases aggregate demand
B
It increases unemployment and decreases aggregate demand
C
It has no effect on unemployment or aggregate demand
D
It increases both unemployment and aggregate demand
Understanding the Answer
Let's break down why this is correct
Answer
When the government increases its spending during a recession, it aims to boost the economy by creating jobs and increasing demand for goods and services. This extra spending can help reduce the unemployment rate because it leads to more projects and services that require workers. For example, if the government invests in building new roads, it creates jobs for construction workers, engineers, and suppliers, which puts more money into people's hands. As these workers spend their earnings, businesses see higher demand for their products, which can help lift the economy out of recession. Overall, this increase in government spending encourages more economic activity, helping to lower unemployment and improve aggregate demand.
Detailed Explanation
When the government spends more money, it creates jobs. Other options are incorrect because Some might think that more spending leads to job loss; It's a common belief that spending has no impact.
Key Concepts
unemployment rate
aggregate demand
Topic
Recession and Fiscal Policy Actions
Difficulty
medium level question
Cognitive Level
understand
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