When an Economy Is Operating Below Its Potential Capacity, Keynesian

question 205

Multiple Choice

When an economy is operating below its potential capacity, Keynesian economists argue that:

• A) taxes should be raised if the government is currently running a budget deficit.
• B) taxes should be lowered but only if the government is running a budget surplus.
• C) the government should cut taxes and/or increase spending in order to stimulate aggregate demand.
• D) all of the above.

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