Question

QUESTION FOUR [10]

Discuss two (2) demand side policies to reduce unemployment

Answer 1

Ans. The two demand side policies to reduce unemployment are:-

1. The government can decrease the unemployment by pursuing expansionary fiscal policy. This involves either cutting of taxes or increased government spending. Lower taxes helps to increase the disposable income and then consumption which in turn increases the aggregate demand and reduces the unemployment.

2. Reduction of unemployment can also occur through monetary policy. This would involve cutting interest rates. Lower interest rates decreases the cost of borrowing and in turn encourages individuals to spend and invest.