The graph shows the number of employed workers in the United States in nonfarm jobs from 2008 to 2013.

A line graph titled Number of Employed workers in nonfarm jobs, 2008 to 2013 shows years on the x axis from 2008 to 2013 and millions of employed workers on the y axis, from 100 to 120. Line starts at 116 in 2008, to 108 in 2009, 107 in 2010, 108 in 2011, 112 in 2012, 113 in 2013.

What course of action might a government take to respond to the downturn revealed in this graph?

reducing the size of its armed forces
laying off unnecessary workers
decrease taxes to increase consumers' money supply
encouraging people to travel overseas

The correct option is C. By decreasing taxes to increase consumers' money supply such a course of action might a government taken to respond to the downturn revealed in this graph.

How does decreasing taxes affect the economy?

Tax reductions increase disposable income, enabling consumers to make larger purchases and boosting GNP. By encouraging consumers to spend more of their increased discretionary income on goods and services, tax reductions shift the aggregate demand curve outward.

Taxes are reduced by the government, which raises disposable income. Higher demand and higher production result from this. Therefore, lowering taxes is the recommended fiscal policy in the event of a weak economy and excessive unemployment.

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