Keynesian analysis suggests that a planned budget surplus
A) will affect aggregate demand only if the money supply decreases by the size of the surplus.
B) will stimulate both consumption and income.
C) will stimulate output and employment.
D) is proper during periods of inflation but may increase unemployment if timed improperly.

Question

Quizplus · Accepted Answer

Keynesian analysis suggests that a planned budget surplus may increase unemployment if timed improperly, as it may reduce aggregate demand and lead to decreased output and employment. A surplus during periods of inflation may be proper to decrease demand and prevent further inflation. However, if implemented during an economic downturn, it may exacerbate the downturn by decreasing demand even further. The other options (A, B, and C) do not accurately reflect Keynesian analysis of planned budget surpluses.

Keynesian Analysis Suggests That a Planned Budget Surplus