Recently, it was observed that people have started saving more rather than spending. This has impacted the demand for luxury goods and services. The decline in the demand led to unemployment in the related sectors. What can be a primary solution to reduce the unemployment levels in the country?
a. increase the interest rates
b. impose fine for savings
c. force industries to rehire employees
d. reduce the interest rates
e. import goods and services
Ok so I think the answer would be lower interest rates because then people would have more money to spend, which would buy more products that would increase money to hire more people
I agree with you.
. What can be a primary solution to reduce the unemployment levels in the country?
increase the interest rates
impose fine for savings
force industries to rehire employees
reduce the interest rates
import goods and services
NextReset
(D) Reduce interest rates. Let people save their money. Raising interest rates would only increases the difficulty in saving money, forcing people to clutch their savings even tighter. In a system where people are able to store and save their money more efficiently, then the more money they can afford to spend. This may allow people to continue to purchase luxury goods, because they won't have to sacrifice necessities. With this hypothetical rise in demand, there may also be a rise in employment, which would eventually counteract the problem presented in this question.
You're on the right track! Lowering interest rates can potentially push people to borrow more money, which would increase their spending power and stimulate demand for goods and services. This increased demand can lead to businesses hiring more employees to meet the higher consumer demand.
To find the primary solution to reduce unemployment levels in the country, we can evaluate the options given:
a. Increase the interest rates: Increasing interest rates tends to discourage borrowing and spending. Therefore, this option would not be effective in reducing unemployment levels as it may further decrease spending and demand.
b. Impose fines for savings: Penalizing savings would discourage people from saving and potentially increase their spending. However, this option does not directly address the decline in demand for luxury goods and services.
c. Force industries to rehire employees: While it may be desirable to encourage industries to rehire employees, forcing industries to do so can have practical limitations and potential negative consequences. It is not a primary solution, as it does not directly stimulate demand.
d. Reduce interest rates: Good job! Reducing interest rates is a common monetary policy tool used to stimulate spending and investment. This can potentially lead to increased demand for goods and services, which, in turn, can result in businesses hiring more employees to meet the higher demand. This option aligns with your reasoning.
e. Import goods and services: Importing goods and services may provide more variety and potentially increase the overall supply available. However, it may not directly address the decline in demand for luxury goods and services within the country.
Therefore, based on the options given, the primary solution to reduce unemployment levels in the country is to reduce the interest rates (option d). By doing so, it can potentially increase spending, stimulate demand, and encourage businesses to hire more employees.