In the Keynesian model,the difference between no intervention by the government during a recession and intervention using expansionary monetary or fiscal policy is that no intervention will return the economy to its equilibrium level of output
A)faster than intervention will and at a lower price level.
B)slower than intervention will and at a higher price level.
C)slower than intervention will and at a lower price level.
D)faster than intervention will and at a higher price level.

Question

Quizplus · Accepted Answer

In the Keynesian model, no intervention by the government during a recession will result in a slower return of the economy to its equilibrium level of output, and this will occur at a lower price level. Intervention using expansionary monetary or fiscal policy will speed up the return of the economy to its equilibrium level of output but will also result in a higher price level. Therefore, the correct choice is C.

In the Keynesian Model,the Difference Between No Intervention by the Government