According to traditional Keynesian economics, contractionary fiscal policy initiated by the federal government
A. is an appropriate way to slow down an over-heated economy.
B. is an appropriate way to prevent recessions and depressions.
C. will always fail due to crowding out effects.
D. is never appropriate.
Answer: A
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The long-run aggregate supply curve is vertical at
A. potential output. B. the actual level of nominal output. C. 100% employment of the labor force. D. the actual level of real output.
In the graph above, draw a supply curve, S1, and then draw a less elastic supply curve, S2.
Exhibit 4-2 Supply and demand curves
In Exhibit 4-2 an increase in supply would cause a movement from which equilibrium point to another, other things being equal?
A. E1 to E2. B. E1 to E3. C. E4 to E1. D. E3 to E4.
If the demand curve facing a firm had a price elasticity of demand equal to infinity and the firm raised its price, its total revenue would:
A. decrease slightly. B. fall to zero. C. not change. D. increase.