Country X's economy is in recession. Which of the following combinations of fiscal and monetary policy actions would move the economy toward full employment in the short run?

Question

Advanced Placement (AP)

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8 July, 03:04

Country X's economy is in recession. Which of the following combinations of fiscal and monetary policy actions would move the economy toward full employment in the short run?

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Brett Cobb · Answer 1

Country X can puruse cheap monetary policy with deficit fiscal policy to generate full employment in short run.

Explanation:

Recession can be understood as a period of extended reduced demand accompanied by the retrenchment of the workforce as a cost-cutting measure. Recession can be handled by an adequate mix of monetary and fiscal policy measure-

Monetary measure - Cheap monetary measure must be pursued by the Country X. This includes low repo rate, cheap loans to employment generating avenues, business establishments etc.

Fiscal policy - Government of the country X should indulge in deficit financing, borrowing from international institutions, providing tax breaks, tax credits to let the firms run in full swing and generate employment.