When the economy is in a recessionary gap, Keynesian economists will often advocate expansionary policy measures. Why?
A) Keynesians believe the economy sometimes gets stuck in a recessionary gap and can't get itself out without government intervention.
B) Keynesians believe the economy itself sometimes takes too long to eliminate the recessionary gap and return to full-employment output.
C) Keynesians are generally in favor of increasing taxes.
D) a and b
E) a and c
D
You might also like to view...
In the Keynesian model, the difference between no intervention by the government during a recession and intervention using expansionary monetary or fiscal policy is that no intervention will return the economy to its equilibrium level of output
A) faster than intervention will and at a lower price level. B) slower than intervention will and at a higher price level. C) slower than intervention will and at a lower price level. D) faster than intervention will and at a higher price level.
Suppose that, at the market clearing price of natural gas, the price elasticity of demand is -1.2 and the price elasticity of supply is 0.6. What will result from a price ceiling that is 10 percent below the market clearing price?
A) A shortage equal to 1.8 percent of the market clearing quantity B) A shortage equal to 0.6 percent of the market clearing quantity C) A shortage equal to 18 percent of the market clearing quantity D) A shortage equal to 6 percent of the market clearing quantity E) More information is needed.
During the expansion phase of the business cycle, we would normally expect to see real income ____, price level ____, and unemployment rate ____.
a. increasing; increasing; increasing b. increasing; decreasing; decreasing c. increasing; increasing; decreasing d. falling; increasing; increasing
According to Keynesians, an increase in production when the money supply is fixed will
a. increase the transactions demand for money and that will cause the velocity of money to increase b. increase the transactions demand for money and that will cause the velocity of money to decrease c. decrease the transactions demand for money and that will cause the velocity of money to increase d. decrease the transactions demand for money and that will cause the velocity of money to decrease e. increase the speculative demand for money and that will cause the velocity of money to increase