Question

During a severe recession, businesses are reluctant to

Q: Answer-During a severe recession, businesses are reluctant to invest, and consumer spending has declined si...

Keynesian economics suggests that during a recession, the government should increase spending and decrease taxes to stimulate aggregate demand, boost economic activity, and reduce unemployment.

invest, and consumer spending has declined significantly. Unemployment rates are high, and there is a general lack of confidence in the economy. According to Keynesian economics, what would be the most appropriate government response in this situation?

A Reduce government spending and increase taxes.

B Increase government spending and decrease taxes.

C Maintain a balanced budget.

D Rely on the free market to self-correct.

E Implement wage and price controls.

Practice Next

More Financial Management Questions