The government has an important job in helping control unemployment, which is when people can’t find work. They use two main tools to do this: fiscal policy and monetary policy.

1. Fiscal Policy:

   • This is all about how the government spends money and taxes people. When the government spends more on things like roads, schools, and healthcare, it can create new jobs. For example, during the big financial crisis, many countries spent money to help their economies, which made a positive difference in their economies by about 1-3%.
   • Tax cuts can also help create jobs. When the government lowers taxes for companies, it can encourage them to hire more workers. Studies show that if the government lowers taxes by $1, it can lead to an increase of about$2 in spending in the economy.

2. Monetary Policy:

   • The government can also influence unemployment by changing interest rates through the central bank. When the government lowers interest rates, borrowing money becomes cheaper. This can help businesses grow and hire more workers. For example, in Sweden, when they decreased the interest rate by 0.25%, unemployment dropped by about 0.5%.
   • Another way to help is through something called quantitative easing. This means the government buys financial assets to put more money into the economy. After the recession in 2008, the Federal Reserve used this method to help lower unemployment from 10% down to about 4.7%.

In short, what the government does with its money and interest rates plays a big role in helping to control unemployment.