Assume the economy is operating at a real GDP above full-employment real GDP. Keynesian economists would prescribe which of the following policies?

Question

Quizplus · Accepted Answer

When the economy is operating above its full-employment real GDP, it indicates an overheating economy that could lead to inflation. Keynesian economists would recommend contractionary policies to decrease aggregate demand, thereby cooling the economy and reducing inflationary pressures. This could involve increasing taxes, reducing government spending, or raising interest rates.

Assume the Economy Is Operating at a Real GDP Above