An economy experiences a sudden, unexpected downturn with rising unemployment and a sharp decline in aggregate demand. Within the conventional framework for macroeconomic policy, which of the following actions represents the most probable and immediate response aimed at short-term stabilization?

According to the conventional framework for macroeconomic policy, the government's budget and taxation plans are the primary tools used for making rapid, frequent adjustments to stabilize the economy against short-term shocks like sudden changes in inflation or unemployment.

Rationale for the Conventional Division of Macroeconomic Policy Roles

Evaluating a Policy Proposal