Suppose equilibrium GDP is less than full-employment output and the economy is in a recession. What are the appropriate fiscal policies that would take the economy to full employment level?
Decrease government spending
Lower transfer payments
if Economy is in recession and equilibrium GDP is below the full employment then objective of Government would be increase GDP and aggregate demand to reach full employment for which appropriate fiscal policies would be 1) increase government spending 2) Decrease taxes 3) increase transfer payment , or government can also use mix of these policies to achieve full employment all above mentioned policies will increase aggregate demand and eventually GDP