Question

In the scenario where the United States is in a recession and the government aims to improve the economy and lower the unemployment rate at the federal level, which of the following options is considered a fiscal policy that could address high unemployment and reduce it?

A) Increase in government spending on housing
B) Increase income taxes
C) Increase corporate taxes
D) Reduce government spending on roads

Answer 1

The correct answer is A) Increase in government spending on housing, which falls under expansionary fiscal policy, a strategy used to reduce unemployment and stimulate economic activity during a recession.

Step-by-step explanation:

When the United States is in a recession and the goal is to lower unemployment, the government can engage in expansionary fiscal policy. This can involve either reducing taxes or increasing government spending to stimulate economic activity, which in turn should help to reduce unemployment. Considering the options provided:

• Increase in government spending on housing is a form of fiscal policy that can help to reduce unemployment and improve the economy.
• Increase income taxes would likely contract the economy further during a recession.
• Increase corporate taxes would also tend to contract the economy.
• Reduce government spending on roads would typically be a contractionary fiscal policy.

Therefore, the correct answer is A) Increase in government spending on housing, as it directly aligns with an expansionary fiscal policy approach to reduce unemployment during a recession.