In an effort to stop the U.S. recession of 2007-2009, the federal government:
A. reduced taxes and increased government spending.
B. imposed large tariffs on many imported goods to protect domestic jobs.
C. raised interest rates to encourage greater business investment.
D. avoided Keynesian policies because of the threat of inflation.
A. reduced taxes and increased government spending.
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A firm facing a horizontal demand curve
A. cannot affect the price it receives for its output. B. always produces at an output at which P = MR. C. faces perfectly elastic demand for its product. D. All of the responses are correct.
Starting from long-run equilibrium, a large increase in government purchases will result in a(n) ________ gap in the short-run and ________ inflation and ________ output in the long-run.
A. expansionary; higher; potential B. recessionary; higher; potential C. recessionary; lower; lower D. expansionary; higher; higher