The Policy Response to the Recession of 2008-2009 Provided an Experiment

question 15

Multiple Choice

The policy response to the recession of 2008-2009 provided an experiment on the potency of Keynesian fiscal policy. In what respect was this true?

• A) The money supply increased rapidly and the short-term interest rates were pushed to near zero just as the Keynesian model of fiscal policy recommends.
• B) Government spending increased sharply and the budget deficits were large just as the Keynesian model of fiscal policy recommends.
• C) The money supply increased rapidly and the budget was shifted toward a surplus just as the Keynesian model recommends.
• D) The federal budget was balanced just as the Keynesian model indicates would be prudent policy during a recession.

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Definitions:

Symbolic

Relates to or denotes symbols or symbolism, carrying particular meanings or representing something beyond literal interpretation.

Cognition

Gaining insight and knowledge through the processes of thinking, experiencing life, and sensory engagement.

Introspection

Analyzing one's own mental and emotional processes.

Empirically

Based on observation or experiment rather than theory or pure logic; grounded in real-world evidence.