According to Keynesian theory,the correct fiscal policy action to stimulate the economy would be to:
A) Raise taxes to increase aggregate demand.
B) Increase the money supply to increase aggregate supply.
C) Increase government expenditures to increase aggregate demand.
D) Increase education spending to increase aggregate supply.

Question

Quizplus · Accepted Answer

According to Keynesian theory, the correct fiscal policy action to stimulate the economy would be to increase government expenditures to increase aggregate demand. This is because Keynesian theory advocates for government intervention in the economy to offset fluctuations in aggregate demand. By increasing government spending, more money flows into the economy, leading to increased consumer spending and demand for goods and services. This, in turn, can stimulate the economy and create jobs. Raising taxes, as in choice A, would decrease disposable income and reduce consumer spending, which would be counterproductive in a recession. Increasing the money supply, as in choice B, would stimulate inflation rather than economic growth. Increasing education spending, as in choice D, may lead to long-term economic benefits, but it would not have an immediate impact on aggregate demand in the short run.

According to Keynesian Theory,the Correct Fiscal Policy Action to Stimulate