Asked by Jonathan Ghansiam on May 17, 2024
Verified
According to John Maynard Keynes' General Theory of Employment,Interest and Money,the government should _____ in order to get an economy out of a depression.
A) increase spending
B) decrease spending
C) reduce subsidies
D) increase taxes
E) allow the economy to correct itself
General Theory
In the context of economics, it often refers to Keynes's "The General Theory of Employment, Interest, and Money," which argues that aggregate demand is the primary driving force in an economy.
Increase Spending
A policy or action that leads to a higher level of expenditure by individuals, businesses, or the government to stimulate economic activity.
Depression
A prolonged period of significant economic downturn, marked by high unemployment, low output, and declining prices.
- Absorb the essential elements of Keynesian economics and its approach in handling economic downturns through the implementation of fiscal policy.
Verified Answer
AC
Asinate ColatiMay 23, 2024
Final Answer :
A
Explanation :
According to Keynesian theory, during a recession or depression, aggregate demand falls, leading to lower employment and output. To counteract this, the government must increase its own spending to stimulate aggregate demand, thereby promoting employment and economic growth. This is known as fiscal stimulus.
Learning Objectives
- Absorb the essential elements of Keynesian economics and its approach in handling economic downturns through the implementation of fiscal policy.