Expansionary Policies Boost Employment Steps:

• Employment rises when aggregate demand (AD) increases, as firms hire more workers.
• Decreasing general taxation raises disposable income, boosting consumption and AD.
• Decreasing interest rates lowers borrowing costs, encouraging investment and further raising AD.
• The combination of both maximizes AD growth, leading to higher employment.

Why B is correct:

• Both measures are expansionary, stimulating AD per the AD-AS model and increasing output/employment.

Why the others are wrong:

• A: Increasing interest rates contracts investment, offsetting tax cut benefits and limiting employment gains.
• C: Raising taxation reduces consumption, counteracting interest rate cuts and yielding mixed or weak effects.
• D: Both policies are contractionary, shrinking AD and reducing employment.

Final answer: B