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Suggest a monetary policy to adjust the decrease in labour. With Graph if applicable please.

Suggest a monetary policy to adjust the decrease in labour. With Graph if applicable please.

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Answer #1

Decrease in labor needs an expansionary monetary policy which cuts interest rates and helps central bank buy government securities to boost credit availability and supply of loanable funds.

This leads to higher liquidity in market and firms can borrow easily at lower rates which helps them boost hiring spends and thus labor force rises and unemployment decrease.

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