Asked by Grace Miller on Jul 18, 2024

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According to Keynes,in order to get the economy out of a recession,the government should:

A) follow an expansionary fiscal policy.
B) encourage firms to export to other nations.
C) follow an contractionary fiscal policy.
D) follow a contractionary monetary policy.
E) not interfere in the market and let the market system heal itself.

Expansionary Fiscal Policy

An increase in government purchases, decrease in net taxes, or some combination of the two aimed at increasing aggregate demand enough to reduce unemployment and return the economy to its potential output; fiscal policy used to close a recessionary gap

Contractionary Fiscal Policy

A decrease in government purchases, increase in net taxes, or some combination of the two aimed at reducing aggregate demand enough to return the economy to potential output without worsening inflation; fiscal policy used to close an expansionary gap.

Contractionary Monetary Policy

A monetary policy strategy used by central banks to reduce inflation and cool an overheating economy by raising interest rates and decreasing the money supply.

  • Understand the principles of Keynesian economics and its approach to dealing with recessions through fiscal policy.
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MA
Miriam ArriagaJul 20, 2024
Final Answer :
A
Explanation :
According to Keynes, during a recession, the government should increase its spending and reduce taxes in order to stimulate aggregate demand and revive economic activity. This is referred to as an expansionary fiscal policy.