According to the Keynesian view, if policy makers thought the economy was about to fall into a recession, which of the following would be most appropriate?
A) a change in government spending and taxation that will lead to a budget surplus
B) a planned increase in the budget deficit
C) reducing government expenditures
D) balancing the budget

Question

Quizplus · Accepted Answer

According to the Keynesian view, during a recession, the government should increase its spending, which will lead to an increase in aggregate demand and help pull the economy out of the recession. This can be accomplished through a planned increase in the budget deficit. Choice A is not appropriate since a budget surplus would lead to a decrease in government spending and taxation, which would decrease aggregate demand further. Choice C would also decrease government expenditures, which would not be appropriate during a recession. Choice D, balancing the budget, would be inappropriate as it would require either a decrease in spending or an increase in taxes which would decrease aggregate demand and worsen the recession.

According to the Keynesian View, If Policy Makers Thought the Economy