Keynesian economics predicts that if government policy makers deem current equilibrium real Gross Domestic Product (GDP) to be "too low," then an appropriate policy action would be to
A) do nothing, because the economy is self-adjusting.
B) raise government spending, thereby increasing aggregate demand and pushing up real Gross Domestic Product (GDP) with little or no inflationary consequences.
C) increase taxes, thereby causing aggregate demand to increase and inducing a rise in real Gross Domestic Product (GDP) with little or no inflationary consequences.
D) reduce the money stock, thereby causing aggregate demand to decrease and inducing a rise in fall in the price level that generates an increase in total planned expenditures.
B
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A liquidity trap is
a. the vertical portion of the LM schedule. b. the horizontal portion of the LM schedule. c. a situation where a given change in the money stock induces a large reduction in the interest rate. d. Both a and c e. Both b and c
A situation in which output decreases while prices increase is often referred to as:
A. inflation. B. negative economic growth. C. a recession. D. stagflation.