Keynesian Analysis Stresses That a Tax Cut That Increases the Government's

question 1

Multiple Choice

Keynesian analysis stresses that a tax cut that increases the government's budget deficit (or reduces its budget surplus)

• A) is appropriate during a period of inflation.
• B) will increase the money supply.
• C) will stimulate aggregate supply and, thereby, promote employment.
• D) will stimulate aggregate demand and, thereby, promote employment.

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Definitions:

Short Run

A time period in economics during which at least one factor of production is fixed, limiting the ability of the economy or firm to fully adjust.

Long Run

A period in which all factors of production and costs are variable, allowing full adjustment to any change.

Shut Down

In economics, a short-run decision not to produce anything during a specific period because of current market conditions.

Short Run

A period in which at least one factor of production is fixed, and firms can adjust only to a limited set of variables.