If an economy were experiencing a high rate of unemployment as the result of weak aggregate demand, a Keynesian economist would be most likely to recommend
a. a reduction in taxes coupled with a reduction in government expenditures of equal size.
b. an increase in government expenditures coupled with an increase in taxes of equal size.
c. a reduction in taxes, without any offsetting reduction in government expenditures.
d. maintenance of a balanced budget.
C
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The self-correcting property of the economy means that output gaps are eventually eliminated by:
A. increasing or decreasing potential output. B. government policy. C. decreasing inflation only. D. increasing or decreasing inflation.
Which of the following outstanding debts should Jillian pay off first?
A) A three year loan of $5,000 at 0 percent a year from her mom. B) A $2,000 debt on a credit card charging 18 percent annually. C) A home equity loan of $10,000, which has an effective rate of 6 percent after her tax advantages are taken into account. D) A student loan of $40,000 with a fixed rate of 4 percent.
Suppose the current one-year interest rate is 4%, and financial markets expect the one-year interest rate next year to be 8%. Given this information, the yield to maturity on a two-year bond will be approximately
A) 4%. B) 6%. C) 8%. D) 12%. E) none of the above
During which of the following decades was the debt-to-GDP ratio generally highest in the United States?
A) 1930s B) 1940s C) 1960s D) 1980s E) 1990s