Describe the fiscal policy remedies that a Keynesian economist might prescribe to close a recessionary gap. How might the issue of crowding out impact the effectiveness of these policies?


To close a recessionary gap, a Keynesian economist would suggest the use of expansionary fiscal policy --- a tax cut or an increase in government spending. If crowding out is present, it can either partially or fully negate the growth in Real GDP created by these fiscal policy solutions.

Economics

You might also like to view...

Tariffs

A. may be imposed either to raise revenue or to shield domestic producers from foreign competition. B. are excise taxes on goods exported abroad. C. are per-unit subsidies designed to promote exports. D. are also called import quotas.

Economics

After the adoption of the North American Free Trade Agreement (NAFTA), trade between the United States and Mexico____, and trade between the United States and Canada ____

a. rose; fell b. rose; rose c. fell; fell d. fell; rose

Economics

Which of the following is an example of a public good?

A. A weather warning system. B. A television set. C. A sofa. D. A bottle of soda.

Economics

_____ looks at how an organization does its work: activities pursued to accomplish specific objectives for specific customers.

A. Job analysis B. Market analysis C. Job structure D. Supply chain analysis

Economics