According to the New Keynesian Approach, Output Fell During the Early

question 78

Multiple Choice

According to the new Keynesian approach, output fell during the early 1980s because

• A)fiscal policy was sufficiently contractionary to offset an expansionary monetary policy.
• B)the leftward shift of the AD curve was greater than the rightward shift of the SRAS curve.
• C)consumers and businesses came to expect higher inflation, thereby causing the SRAS curve to shift to the left.
• D)Congress and the President decided to raise taxes and cut spending in order to reduce the budget deficit.

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Definitions:

Social Security

A government program that provides monetary assistance to people with an inadequate or no income.

Welfare System

A government program designed to support individuals and families in need, providing financial assistance, healthcare, and social services.

Adequate Employment

Adequate employment refers to employment situations where individuals have jobs that sufficiently utilize their skills, offer fair compensation, and provide stable working conditions.

Poverty

The state of having insufficient financial resources to meet basic living expenses, such as food, shelter, and healthcare.