The traditional Keynesian approach to fiscal policy assumes that

Question

Quizplus · Accepted Answer

The traditional Keynesian approach assumes that consumers spend more when their incomes are higher, which is the fundamental principle of Keynesian economics. This belief is the foundation for the theory that increased government spending during a downturn can stimulate economic activity by boosting overall demand. Choices A and B are not accurate descriptions of the traditional Keynesian approach, and D is incorrect because traditional Keynesians generally prefer government spending over tax cuts as a means of stimulating demand during a recession.

The Traditional Keynesian Approach to Fiscal Policy Assumes That