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mlee52381 mlee52381
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Country X and Country Y are two neighboring countries that are experiencing a recession. The government of Country X reduced its expenditure during the recession, while Country Y's government increased the supply of money in the economy. Which of the two policies will help the economy recover from the recession?
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Macroeconomics


Edition: 3rd
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scmhackscmhack
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Aggregate demand falls during a recession. This reduces production and the demand for labor, leading to a sharp increase in unemployment and a further reduction in private expenditure. If the government also reduces its expenditure during a recession, production will fall even more, leading to more job losses. However, if the central bank increases the supply of money, the aggregate price level will increase. An increase in output prices will lead to an increase in production. As a result, firms will hire more workers. Thus, the policy adopted by the government of Country Y is a better policy for helping recover from a recession.

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this is exactly what I needed
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This helped my grade so much Perfect
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