To bring the economy out of an inflationary period, Keynes argued that the government should
A) cut both taxes and government spending.
B) increase both taxes and government spending.
C) increase taxes and/or decrease government spending.
D) decrease taxes and/or increase government spending.

Question

Quizplus · Accepted Answer

Keynesian economics suggests that to combat inflation, the government should reduce demand in the economy. This can be achieved by increasing taxes (which reduces consumers' disposable income and thus their spending) and/or decreasing government spending (which directly reduces the amount of money the government is injecting into the economy). Both measures would help in cooling down an overheated economy.

To Bring the Economy Out of an Inflationary Period, Keynes