📚 Learning Guide
Long Response Questions in AP Economics
hard

How might Keynesian economic theories justify government intervention during a recession through fiscal policy measures?

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Learning Path
Learning Path

Question & Answer
1
Understand Question
2
Review Options
3
Learn Explanation
4
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Choose the Best Answer

A

By proposing tax cuts to increase disposable income

B

By suggesting increased government spending to stimulate demand

C

By advocating for reduced regulation on businesses

D

By recommending higher interest rates to curb inflation

Understanding the Answer

Let's break down why this is correct

Answer

Keynesian economic theories suggest that during a recession, the economy can become stuck in a low growth phase where people spend less money. This reduced spending can lead to businesses making less profit, which may cause them to cut jobs or lower wages. To help the economy recover, Keynesians believe that the government should step in and increase spending, known as fiscal policy, to stimulate demand. For example, if the government builds new roads or invests in schools, it creates jobs and encourages people to spend money, helping the economy grow again. By doing so, the government can help pull the economy out of a recession and reduce unemployment.

Detailed Explanation

Keynesian theory says that during a recession, people spend less. Other options are incorrect because Some think tax cuts will help people spend more; Many believe that less regulation helps businesses thrive.

Key Concepts

economic theories
government intervention
fiscal policy
Topic

Long Response Questions in AP Economics

Difficulty

hard level question

Cognitive Level

understand

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