Keynes Believed That the Way to Prevent Recessions and Depressions

question 168

Multiple Choice

Keynes believed that the way to prevent recessions and depressions was to

• A) reduce spending when there is a recessionary gap.
• B) only change tax rates as a means of regulating the economy.
• C) maximize the crowding out effect.
• D) increase aggregate demand through expansionary fiscal policy.

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Definitions:

Fixed Exchange Rates

A system where the value of a country’s currency is pegged at a set rate to another currency or a basket of currencies.

Foreign Exchange Market

A global decentralized or over-the-counter market for trading currencies, determining exchange rates for every currency.

U.S. Dollar

The United States' official money, commonly utilized worldwide as a standard and reserve currency.

Depreciates

Describes how an asset loses value over time due to wear and tear, age, or obsolescence.