Question

In: Economics

1. John Maynard Keynes believed that economies experiencing high unemployment should adopt policies to:


 1. John Maynard Keynes believed that economies experiencing high unemployment should adopt policies to: 

 reduce the money supply. 

 reduce government expenditures. 

 increase aggregate demand.

 increase aggregate supply.


 2. Other things the same, when the government spends more, the initial effect is that: 

aggregate demand shifts right. 

aggregate demand shifts left. 

aggregate supply shifts right. 

aggregate supply shifts left.

Solutions

Expert Solution


1.

Increase aggregate demand

Reason: Keynes always believed in changing economic conditions through changes in aggregate demand. Thus, in order to reduce high unemployment, Keynes would suggest policies to increase aggregate demand, which would increase demand for goods and services and thus employment.

2.

Aggregate demand shifts right

Reason: An increase in government expenditure is a type of fiscal policy which would lead to an increase in aggregate demand for goods and services.

Rahul Sunny answered 2 years ago
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