In performing its stabilization function it may be appropriate for the Gov. to:?

Question

a) increase both Gov. spending and taxes when Economy expiriences rapid inflation.

b)reduce Gov. spending and increase taxes when Economy expiriences substantial unemployment

c) increase Gov. spending and reduce taxes when Economy expiriences rapid inflation.

d) increase Gov. spending and reduce taxes when Economy expiriences substantial unemployment.

Answer 1

d) increase Gov. spending and reduce taxes when Economy experiences substantial unemployment. One of the antidotes for slowing inflation is fiscal policy such as increasing taxes to stop consumer from spending by dampening consumer confidence and hence the demand for goods and services. If consumers stop spending it represents a major step forward in the fight against increasing prices (inflation).

Answer 2

E. To default and declare bankruptcy .

For a depression is here .

Answer 3

The answer is D.

When the economy is experiencing unemployment, it is in a recession. The government has to increase output with expansionary policy. Government spending and decreasing taxes are both expansionary policies. They increase GDP and return the economy back into equilibrium.

I hope that helped.