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:

Settlement Agreement

An out-of-court resolution to a legal dispute, agreed to by the parties in writing. A settlement agreement may be reached at any time prior to or during a trial.

Mediator

A neutral third party who facilitates negotiations between disputing parties with the aim of reaching a mutually acceptable agreement.

Points of Agreement

Specific terms or conditions within negotiations or discussions that all parties involved accept or approve.

Evaluating Positions

The process of assessing and analyzing the strengths, weaknesses, and potential outcomes of different stances in negotiation or conflict resolution.