Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose 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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