Within the framework of the Keynesian model, which of the following would most likely occur if the federal government increased its spending and enlarged the size of the budget deficit during a period of full employment?
A) The rate of inflation would decline.
B) The rate of inflation would rise.
C) A recession would develop.
D) Interest rates would fall.

Question

Quizplus · Accepted Answer

According to the Keynesian model, during a period of full employment, an increase in government spending and budget deficit would lead to an increase in aggregate demand, causing firms to increase their prices. As a result, the rate of inflation would rise.

Within the Framework of the Keynesian Model, Which of the Following