According to Keynes, what should the government do if private-sector demand is insufficient to maintain full employment?
A) It should act to make the economy's natural transition to the lower level of employment as easy as possible.
B) It should shock the economy with an increase in aggregate demand.
C) It should reduce aggregate supply to reduce inflation.
D) It should print money to promote consumer spending.

Question

According to Keynes, what should the government do if private-sector demand is insufficient to maintain full employment?  
A) It should act to make the economy's natural transition to the lower level of employment as easy as possible. 
B) It should shock the economy with an increase in aggregate demand. 
C) It should reduce aggregate supply to reduce inflation. 
D) It should print money to promote consumer spending.

Quizplus · Accepted Answer

According to Keynes, if private-sector demand is insufficient to maintain full employment, the government should shock the economy with an increase in aggregate demand, such as through fiscal or monetary policy, to stimulate economic activity and create jobs. Option A is an incorrect answer as Keynes believed that the government should actively intervene during times of economic downturns to promote economic growth and increase employment opportunities. Option C is also incorrect as reducing aggregate supply would further reduce employment opportunities and worsen the situation. Option D is incorrect as Keynes did not advocate for printing money as a solution to economic problems.

According to Keynes, What Should the Government Do If Private-Sector