If an economy were experiencing a high rate of unemployment as the result of insufficient aggregate demand, a Keynesian economist would favor:
A. a reduction in taxes coupled with a reduction in government expenditures of equal size.
B. an increase in government expenditures coupled with an increase in taxes of equal size.
C. a reduction in taxes, without any offsetting reduction in government expenditures.
D. maintenance of a balanced budget.
Answer: C
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Assumptions that output is fixed and factor prices have adjusted to reach the level of full employment are:
a. useful for long-run analysis. b. necessary for short-run analysis. c. unrealistic to the extent that economists should not make such assumptions. d. always true and therefore useful both in the long run and short run.
When economists use the terms "supply" and "demand," they are referring to
A) the roles economists must take to improve the economy. B) the plans and ongoing negotiations among individual traders in the market process. C) the ways people meet their needs in society. D) the supply of money and the demand for money. E) the supply of laws and the demand for laws in a well-governed society.