Use the figure below to answer the following question(s). Figure 12-2
Refer to Figure 12-2. Which of the following will most likely be favored by a Keynesian economist if the economy is operating at point a?
A) a balanced budget
B) restrictive fiscal policy
C) expansionary fiscal policy
D) continuation of the current tax and expenditure policies (dependence on the economy's self-correcting mechanism to restore full employment)

Question

Use the figure below to answer the following question(s). Figure 12-2
 Refer to Figure 12-2. Which of the following will most likely be favored by a Keynesian economist if the economy is operating at point a?
A) a balanced budget 
B) restrictive fiscal policy 
C) expansionary fiscal policy 
D) continuation of the current tax and expenditure policies (dependence on the economy's self-correcting mechanism to restore full employment)

Quizplus · Accepted Answer

A Keynesian economist would most likely favor expansionary fiscal policy at point a in order to stimulate aggregate demand and increase employment. This could involve increasing government spending or decreasing taxes to encourage consumer spending. A balanced budget or restrictive fiscal policy would not address the issue of low employment and may even worsen economic conditions. Continuation of the current policies, relying on the economy's self-correcting mechanism, would not be favored by a Keynesian economist as they believe government intervention is necessary to overcome economic downturns.

Use the Figure Below to Answer the Following Question(s)