(solution) Suppose the target rate of unemployment is 5 percent but the

(solution) Suppose the target rate of unemployment is 5 percent but the

Suppose the target rate of unemployment is 5 percent but the actual rate of unemployment is 4 percent.  Given this information, which of the following policies is most appropriate according to the AS/AD model?

A;  A tax cut

B: An increase in government spending

C:  A tax increase

D:  No change in taxes or government spending