Answered

Which policy suggests Keynesian economic theory?

A. Proposing long-term solutions in order to create wider swings in the business cycle
B. Short-term increases in government spending to stimulate the economy
C. Reducing government involvement in the free-market economy
D. Creating a national banking system that owns and operates most of the global and regional banks



Answer :

GinnyAnswer

Final answer:

Keynesian economic theory recommends using fiscal policies to address economic challenges such as recessions and inflation.


Explanation:

Keynesian economic theory suggests using expansionary fiscal policy during a recession, such as increasing government spending or implementing tax cuts to stimulate the economy by shifting the aggregate demand curve to the right. On the other hand, contractionary fiscal policy, like tax increases or government spending cuts, is recommended when the economy is operating above potential GDP to combat inflation.


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