Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
Increasing taxes to reduce government debt
B
Cutting social welfare programs to balance the budget
C
Increasing government spending on infrastructure projects
D
Reducing interest rates to encourage private investment
Understanding the Answer
Let's break down why this is correct
Answer
In Keynesian economics, one of the most effective fiscal policy actions to reduce unemployment during a recession is increasing government spending. When the government spends money, it creates jobs directly by hiring workers for public projects, like building roads or schools. This not only puts money in the hands of those workers but also helps local businesses because these workers will spend their earnings on goods and services. For example, if the government decides to build a new bridge, it will hire construction workers, and those workers will then buy lunch at local restaurants or shop in nearby stores, boosting the economy. Overall, this cycle of spending helps to lower unemployment by stimulating demand for jobs and goods.
Detailed Explanation
Increasing government spending on infrastructure projects creates jobs. Other options are incorrect because Some think raising taxes helps pay off debt; Cutting social programs seems like saving money.
Key Concepts
fiscal policy
unemployment rate
Keynesian economics
Topic
Recession and Fiscal Policy Actions
Difficulty
hard level question
Cognitive Level
understand
Ready to Master More Topics?
Join thousands of students using Seekh's interactive learning platform to excel in their studies with personalized practice and detailed explanations.