The purpose of Keynesian fiscal policy to combat demand-deficient unemployment i

Question

The purpose of Keynesian fiscal policy to combat demand-deficient unemployment in a recession is to:

            a.         increase aggregate demand so that it intersects aggregate supply at the full employment level of output

            b.         decrease aggregate demand so that it intersects aggregate supply at the full employment level of output

            c.         increase the money supply by a constant 4% annual rate

            d.         decrease aggregate supply such that it intersects aggregate demand at the full employment level of output

Explanation / Answer

During the recession, demand is deficient. Deficiency in demand leads to the widespread unemployment and fall in output. Thus, for creating full employment, fiscal policy shall be used to increase the aggregate demand.

Thus correct option is (a)

Related Questions

Navigate

• Browse (All)
• Browse T
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.