Question

four policy government can use to lower unemployment

Answer 1

To lower unemployment, government can use following policy tools:

1. Decrease corporate income tax

Lower corporate income tax will increase firm profitability, which increases aggregate demand, increasing GDP and output. As a result, unemployment will decrease.

2. Decrease personal income tax

Lower personal income tax will increase personal consumption, which increases aggregate demand, increasing GDP and output. As a result, unemployment will decrease.

3. Increase government spending

Higher government spending on goods and services will directly increase aggregate demand, increasing GDP and output. As a result, unemployment will decrease.

4. Decrease minimum wage rate

Lower minimum wage will lower production cost, so firms will increase production. This increases aggregate supply, increasing GDP and output. As a result, unemployment will decrease.