The Keynesian analysis of fiscal policy implies that
A) fiscal policy should generally be expansionary except during periods of economic recession.
B) fiscal policy should generally be restrictive except during inflationary booms.
C) the federal budget should be balanced annually except during war.
D) the federal budget should be used to maintain aggregate demand at a level consistent with full employment.

Question

Quizplus · Accepted Answer

The Keynesian analysis of fiscal policy suggests that the federal budget should be used to maintain aggregate demand at a level consistent with full employment. This means that fiscal policy should be expansionary during periods of economic recession and restrictive during inflationary booms. The idea of balancing the federal budget annually except during war is not a core principle of Keynesian economics.

The Keynesian Analysis of Fiscal Policy Implies That