The Theory That Argues Most Strongly for Countercyclical Policy Activism

question 62

Multiple Choice

The theory that argues most strongly for countercyclical policy activism is

• A) Keynesian economics.
• B) classical economics.
• C) monetarism.
• D) rational expectations theory.

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Definitions:

Disposable Income

Refers to the amount of money that households have available for spending and saving after income taxes have been accounted for.

APS (Average Propensity to Save)

The fraction of total income that is saved by the average household.

Disposable Income

The amount of money an individual or household has to spend or save after income taxes have been deducted.

Saving

The act of setting aside money for future use rather than spending it immediately.