If an economy were experiencing a high rate of unemployment as the result of insufficient aggregate demand, a Keynesian economist would favor:

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A Keynesian economist would favor a reduction in taxes without any offsetting reduction in government expenditures to increase aggregate demand and boost economic growth. This approach is known as fiscal stimulus and is designed to increase consumer spending and business investment, which in turn creates jobs and reduces unemployment. A reduction in taxes without any offsetting reduction in government expenditures would increase disposable income, encouraging people to consume more, while also incentivizing businesses to invest in expanding their operations. Increasing taxes would have the opposite effect, reducing disposable income and decreasing aggregate demand. A reduction in government expenditures without a corresponding reduction in taxes would simply reduce overall demand, exacerbating the unemployment problem. Maintaining a balanced budget would also do little to address the underlying problem of insufficient aggregate demand.

If an Economy Were Experiencing a High Rate of Unemployment