Fiscal policy or Monetary policy?

The problem is this; you are in control of an economy, which is greatly effected by unemployment. You need to devise a policy, whether fiscal, monetary or even supply side, to stimulate employment.

What policy would you use, and what do you think would be an outcome of using that policy?

I dont believe Fiscal policy would do the trick, especially in the short run. Taxes take time to stimulate the economy, and that is probably the main factor of fiscal policy.

A major decrease in interest rates would probably be the best way to combat unemployment. Firstly, business's would be less hesistant to borrow, and therefore invest more into their companies. If a company was to expand, it would more than likely need to increase its production by increasing the amount of employees. This therefore creates an opportunity for more jobs.

However, there are other factors, which cause unemployment. Geographical immobility, basically means people are unable to work because of their location. If this was the problem in the first place, maybe changing government spending habits (fiscal policy) would be the case. If the government spent more on transport, or roads, people could find it easier to travel to work.

You might want to be a bit more specific with your questions. If this is for an exam or assignment, wont it give you the complete scenario? Unemployment has many factors such a cyclical, geographical, and also frictional.

>>2
yeah, but when dealing with the interest rate you have to be carefull of the potential inflation problem it may bring with it in it's wake. but not knowing the factors that decide the level of inflation inertia in our thought economy that would be difficult to decide whether it would be reasonable or not.

Taxes do take a time to adjust, but you could also go with the classical keynesian solution, and just up government spending, >>2 mentioned this as people could find it easier to travel thus  reducing the problem of geographical immobility, but it would also produce jobs for the people who were to improve the infrastructure. This method of course leaves us with quite a large budget deficit unless we have something to spunge off (revenue from oil production etc. see the prince of dubai).