If the economy experiences stagflation,
A)government can quickly restore full employment by doing nothing to interfere with the economy's natural self-correcting forces
B)only Keynesian policies can remedy the situation
C)only anti-unemployment policies can remedy the situation
D)Keynesian anti-inflation policies will raise the inflation rate
E)increasing a federal budget surplus will worsen inflation

Question

Quizplus · Accepted Answer

Increasing a federal budget surplus typically involves reducing government spending or increasing taxes, which can decrease aggregate demand and potentially worsen unemployment without addressing inflation, thus exacerbating stagflation.

If the Economy Experiences Stagflation