In the Keynesian framework, the way to fight a recession is to
A) cut taxes and/or increase government spending.
B) reduce interest rates.
C) increase the population with more immigration.
D) do nothing and wait for the economy to return to full employment on its own.

Question

Quizplus · Accepted Answer

According to Keynesian economics, during a recession, there is a lack of aggregate demand for goods and services. To increase demand, the government needs to increase spending or cut taxes to put more money in the hands of consumers. This, in turn, will lead to an increase in aggregate demand, which will lead to an increase in the production of goods and services and ultimately lead to economic growth. Therefore, the best choice to fight a recession in the Keynesian framework is to cut taxes and/or increase government spending.

In the Keynesian Framework, the Way to Fight a Recession