Actual GDP in a country is estimated to be 10 percent below potential GDP. Prices are virtually unchanged from one year ago. Unemployment is 12 percent of the civilian work force, much higher than it has been in many years. Which of the following policies would be the most appropriate for improving these economic conditions?
a) reductions in the federal debt
b) decreases in interest rates by the central bank.
c) increases in corporate and personal income taxes
d) increases in reserve requirements on deposits at commercial banks to protect depositors.
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