Answer to Question #71517 in Macroeconomics for lenie

Question

Suppose equilibrium GDP is less than full-employment output and the economy is in a recession. What are the appropriate fiscal policies that would take the economy to full employment level?
Increase taxes
Decrease government spending
Lower transfer payments
Decrease taxes

Answer 1

if Economy is in recession and equilibrium GDP is below the full employment then objective of Government would be increase GDP and aggregate demand to reach full employment for which appropriate fiscal policies would be 1) increase government spending 2) Decrease taxes 3) increase transfer payment , or government can also use mix of these policies to achieve full employment
all above mentioned policies will increase aggregate demand and eventually GDP