Question

Under which conditions does the government use expansionary and contractionary policy? When GDP is _______ and unemployment is _______, the government might use expansionary policy to help the economy grow. When inflation is _______ and GDP is growing too _______, the government might use contractionary policy to slow down the economy.

a. High, high, high, rapidly
b. Low, high, low, rapidly
c. High, low, low, slowly
d. Low, low, high, slowly

Answer 1

The government uses expansionary policy when GDP is low and unemployment is high to help the economy grow, and contractionary policy when inflation is high and GDP is growing too rapidly to prevent the economy from overheating.

Step-by-step explanation:

The government uses expansionary and contractionary policy to manage the economy's performance. The correct answer for when the government might use expansionary policy to help the economy grow is when the GDP is low and unemployment is high. This is because the goal of expansionary policy is to increase aggregate demand, which can stimulate economic growth and reduce unemployment. On the other hand, the government may use contractionary policy when inflation is high and the GDP is growing too rapidly. Contractionary policy aims to decrease the level of aggregate demand to help control inflation and prevent the economy from overheating. Therefore, the answer to the question is when GDP is low and unemployment is high, the government might use expansionary policy; when inflation is high and GDP is growing too rapidly, the government might use contractionary policy, which corresponds to option b. Low, high, high, rapidly.