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Principles of Economics 2e

2nd Edition
Steven A. Greenlaw; David Shapiro
ISBN: 9781947172364

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BuyFindarrow_forward

Principles of Economics 2e

2nd Edition
Steven A. Greenlaw; David Shapiro
ISBN: 9781947172364
Textbook Problem

What are the different policy tools for dealing with cyclical unemployment?

To determine

To state: The policies to deal with cyclical unemployment

Explanation

The policies used to deal with cyclical unemployment are Monetary Policy and Fiscal Policy.

Monetary policy is about managing employment by managing the supply of money. The Federal Reserve lowers the interest rate and making it more attractive for the banks to borrow from the Federal Reserve thus to increase the supply of money. And then when bank borrows more, they have more capital available which allows them to lend loans to individuals and businesses. Later they spend that loan on services and goods increasing the overall demand...

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