📚 Learning Guide
Fiscal Policy in Recessions
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According to Keynesian economics, which fiscal policy measure is most effective during an economic recession?

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Learning Path

Question & Answer
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Choose the Best Answer

A

Reducing government spending

B

Increasing taxes

C

Increasing government spending

D

Implementing austerity measures

Understanding the Answer

Let's break down why this is correct

Answer

According to Keynesian economics, the most effective fiscal policy measure during an economic recession is increased government spending. This approach works because when the economy is struggling, people often have less money to spend, which can lead to lower demand for goods and services. By the government stepping in and spending more, it can create jobs and stimulate demand, helping to boost the economy. For example, if the government invests in building new roads, it not only provides work for construction workers but also improves infrastructure, making it easier for businesses to operate. This combination of job creation and improved services can help pull the economy out of a recession.

Detailed Explanation

When the economy is struggling, spending more money can help. Other options are incorrect because Some think cutting spending saves money, but it can hurt the economy; Many believe higher taxes help the government, but they can take money away from people.

Key Concepts

economic recession
Keynesian economics
Topic

Fiscal Policy in Recessions

Difficulty

medium level question

Cognitive Level

understand

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