Unemployment is rising, and the federal government wants to encourage job growth. Which of the following actions would be an appropriate fiscal policy? A. Expand open-market operations. B. Increase spending on infrastructure projects. C. Lower discount rates. D. Raise taxes on small businesses

2 answers
Question:

Unemployment is rising, and the federal government wants to encourage job growth. Which of the following actions would be an appropriate fiscal policy? A. Expand open-market operations. B. Increase spending on infrastructure projects. C. Lower discount rates. D. Raise taxes on small businesses

Answers

The correct answer is B. When the invesment of public funds in infraestructure projects increases, then the state is conducting a expansionary fiscal policy. It actually enhances employment figures directly, because people need to be employed to conduct those projects. Moreover, these people start earning a salary and demanding higher quantities of goods and services, therefore triggering the increase of production in other sectors and the need for more workers there too. Both A and C could achieve the desired result of increasing employement, but they are both mechanism of the monetary and not fiscal policy. D would cause the opposite result. It describes a tool for a contractionary fiscal policy.

Expanding open-market operations could be an appropriate fiscal policy that could help the government encourage job growth.

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