Asked by Margaret Galeener on Jul 18, 2024
Verified
Keynesian policies are ineffective at combating stagflation because stagflation is caused by:
A) budget surpluses.
B) decreases in aggregate supply.
C) trade deficits.
D) decreases in aggregate demand.
E) budget deficits.
Stagflation
A situation in an economy where there is a combination of stagnant economic growth, high unemployment, and high inflation.
Aggregate Supply
The total supply of goods and services that firms in an economy plan on selling during a specific time period.
Keynesian Policies
Economic strategies based on the ideas of John Maynard Keynes that advocate for government intervention to manage demand and stabilize the economy.
- Identify the rationales behind economic disturbances and the role of state machinery in addressing these disturbances.
- Assess the impact of public policies on economic variables like job creation, price stability, and the real gross domestic product.
Verified Answer
SD
Sebastian DeodatJul 19, 2024
Final Answer :
B
Explanation :
Stagflation is caused by a decrease in aggregate supply, which means that prices are rising while output is decreasing. Keynesian policies focus on increasing aggregate demand, which may lead to inflationary pressures and exacerbate stagflation. Therefore, Keynesian policies are ineffective in combating stagflation.
Learning Objectives
- Identify the rationales behind economic disturbances and the role of state machinery in addressing these disturbances.
- Assess the impact of public policies on economic variables like job creation, price stability, and the real gross domestic product.