Question

Which of the following fiscal policies would mostly likely reduce unemployment?

Increasing funding for local grants

Lowering reserve requirements

Raising taxes on small business

Selling more government securities

Answer 1

fiscal policy works drectly through the money supply of a country so either lowering reserve requirements or selling securities are the only two that are even fiscal policies. Now we want to reduce unemployment (i.e. grow the economy). If we sell more securities that means we are decreasing the money supply, so interest rates go up. When interest rates go up, the economy contracts! This is not what we want.

This leaves B, if we decrease reserves, banks will make more loans which increases the money supply! Increasing the money supply decreases interest rates so the economy will grow.

Answer 2

I'm pretty sure it's A, because the two ^ discussed here are monetary policies, not fiscal

Answer 3

(just an fyi for people who may find this later)