3 To combat recessions and depress or debt reduction Justify

#3

To combat recessions and depress or debt reduction? Justify your position. 3. ions, which should have priority: unemployment

Solution

If the recession or the depression is already being faced, then tackling unemployment should be the priority. Policy makers should aim at increasing output, and employment and try to make the economy grow its way out of debt-pile. If policy makers during a recession target debt reduction, that further squeezes the liquidity and worsens the problem. Short term respite in terms of easy credit creation is important to get the economy back on its feet. Debt reduction is a problem which should be tackled when the economy is performing very well and there is a scope for some credit tightening.