How government might manipulate its expenditures

Question

Explain how government might manipulate its expenditures and tax revenues to reduce unemployment?

Answer 1

To reduce unemployment, government must increase total or aggregate spending in the economy to encourage more production and employment.  It can do so by increasing its own spending on goods and services and, by reducing taxes, inducing the population to spend more.  Reduced taxes on businesses might also have a supply-side effect, allowing businesses to produce more as a result of the lower tax cost burden.  Monetary authorities should be encouraged to increase the supply of money and credit available.