According to Non-Keynesians, How Will an Increase in Government Spending

question 148

Multiple Choice

According to non-Keynesians, how will an increase in government spending financed by borrowing during a recession affect recovery?

• A) Higher future taxes and interest rates will be required to finance the larger debt and this will weaken the recovery.
• B) Repayment of the debt can always be shifted to the future, making it possible to keep tax rates low and thereby strengthen the recovery.
• C) Higher interest payments will increase future government spending, and thereby promote a stronger the recovery.
• D) The increase in government spending will exert a multiplier effect on the economy, leading to a stronger recovery.

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Definitions:

Near Future

A term referring to a time period that is immediately forthcoming, often used in forecasting, planning, and speculative discussions.

Industrializing Quickly

Rapid transformation of a society from primarily agricultural to one based on the manufacturing of goods, experiencing swift changes in economy, infrastructure, and social structure.

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