Asked by Mallory Connell on Apr 29, 2024

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According to Keynes,if private sector demand is insufficient to maintain full employment,the government should:

A) make the economy's natural transition to a lower level of employment as easy as possible.
B) shock the economy with an increase in aggregate demand.
C) reduce aggregate supply to reduce inflation.
D) print money to promote consumer spending.
E) take steps to increase aggregate supply in an economy.

Full Employment

An economic situation where all available labor resources are being used in the most efficient way possible, essentially meaning there is no involuntary unemployment.

Aggregate Demand

The total demand for all goods and services in an economy at various price levels, during a specific time period.

Keynes

Refers to John Maynard Keynes, an influential British economist whose ideas fundamentally changed the theory and practice of macroeconomics and the economic policies of governments.

  • Examine the influence of government interventions, like fiscal and monetary policies, on aggregate demand and aggregate supply in the economic framework.
  • Analyze the macroeconomic theory related to the impacts of wealth, interest rates, and government spending on the economy.
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JK
Jessica KaiserMay 06, 2024
Final Answer :
B
Explanation :
According to Keynes, if private sector demand is insufficient to maintain full employment, the government should intervene through fiscal policy measures to increase aggregate demand. This can be achieved by increasing government spending or cutting taxes, which would inject more money into the economy and stimulate consumption and investment. This would create a multiplier effect that would increase output and employment, leading to full employment. Therefore, option B, shock the economy with an increase in aggregate demand, is the best choice.