Chapter 20, Problem 6MCQ

To determine

The correct example of fiscal policy which is appropriate to combat unemployment

Answer to Problem 6MCQ

From the available options, the correct option is increasing government spending.

Explanation of Solution

Combat unemployment refers to the policy which is used to control unemployment through which the government spending is increased on various schemes and facilities that helps to increase the consumption power of people.

Therefore, the correct example is increasing government spending which is appropriate for combat unemployment because government can reduce unemployment when it spends more to increase the employment opportunities in the country.

Whereas, increase in interest rates, increase taxes, decrease in government transfers and contractionary policy do not come under the combat unemployment.

Here, the correct option is b (increasing government spending) and all other options are incorrect.

Economics Concept Introduction

Introduction: Fiscal policy is a policy through which government spending and tax policies are used to make the economic conditions better.