Assume the economy is in a recession with real output below the natural level of

Question

Assume the economy is in a recession with real output below the natural level of GDP. The MPC is .75 and economic advisors have recommended the use of Keynesian Theory to aggregate demand (AD). This means the solution to the recession would require a(n)(expansionary/ contractionary/ free market/ Money Supply Rule) fiscal policy. If prices do NOT adjust, a gap of $1,000 billion between current real GDP (Y) and the natural level of GDP (Y) can removed if government spending is remain constant) by $billion. 7. (increase / decrease/ leave alone) (increased / decreased / 8. Would you say the Obama Administration seemed to use Classical Theory, 9, would you say the Trump Administration seems to use Classical Theory, 10. Suppose the economy is experiencing a recession. In general, is it better to Keynesian Theory, or Supply-Side Theory to guide its economic policies? Keynesian Theory, or Supply-Side Theory to guide its economic policies? implement an expansionary policy or a contractionary policy to fight the recession? In Neo-Keynesian Theory, the AS curve consists of three ranges, namely, the, 11. Ranges

Explanation / Answer

7) The economic advisors have recommended the use of Keynesian theory to implement the economy by increqsinc government spending to increase the aggregate demand from recession. Here during recession expansionary fiscal policy is used to increase government spending and lower taxes.

Answers: increase AD

Expansionary fiscal policy

Government spending increase

1000 billion

8)Obama administration seemed to use Keynesian theory as during his tenure as President the USA is under great depression which lead him to follow Keynesian theory.

9) Trump administration is seeming to use supply side theory as we can see in 2017 he introduced a tax bill which is a supply side theory.

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