Assume the economy is at full employment and that investment spending declines dramatically. If the goal is to restore full employment, government fiscal policy should be directed toward:

1- an excess of government expenditures over tax receipts.
2- an equality of tax receipts and government expenditures.
3- an excess of tax receipts over government expenditures.
4- a reduction of subsidies and transfer payments and an increase in tax rates.

ANSWER:

an excess of government expenditures over tax receipts.