According to Keynes,which of the following should the government do when the economy overheats?
A)Employ more people.
B)Increase spending.
C)Raise taxes.
D)Practice laissez faire policies.

Question

Quizplus · Accepted Answer

Keynes would recommend raising taxes as a way to reduce demand and cool down an overheating economy. This would reduce people's disposable income and therefore reduce their spending. Employing more people or increasing spending would further fuel inflation and exacerbate the problem. Practicing laissez faire policies would mean doing nothing and letting the market correct itself, which Keynes would argue could lead to prolonged economic downturns.

According to Keynes,which of the Following Should the Government Do