The policy response to the recession of 2008-2009 provided an experiment on the potency of Keynesian fiscal policy. In what respect was this true?
a. The money supply increased rapidly and the short-term interest rates were pushed to near zero just as the Keynesian model of fiscal policy recommends.
b. Government spending increased sharply and the budget deficits were large just as the Keynesian model of fiscal policy recommends.
c. The money supply increased rapidly and the budget was shifted toward a surplus just as the Keynesian model recommends.
d. The federal budget was balanced just as the Keynesian model indicates would be prudent policy during a recession.
B
You might also like to view...
A production possibilities frontier will shift inward if there is more unemployment of labor
a. True b. False
Suppose the money multiplier in the United States is 2.5. If the Fed wants to reduce the money supply by 1,000 it should:
A. sell government securities worth 400. B. buy government securities worth 400. C. sell government securities worth 250. D. buy government securities worth 250.
An example of a good or service that would count in the U.S. GDP would be a bag of coffee made in:
A. Canada by Starbucks. B. Vermont by Green Mountain Coffee Roasters. C. Colombia by Dunkin' Donuts. D. All of these would count in U.S. GDP.
Figure 9.9 depicts a market for electricity. S1 is the supply curve without the external costs. S2 is the supply curve with the $T tax. Assume electricity production incurs external costs. If the government imposes a pollution tax in the amount illustrated, the amount of the pollution tax borne by the electricity producers is:
A. PA - PB. B. PA - PC. C. PB - PC. D. (1/2)?(PA - PB).