According to Keynesian theory,the correct fiscal policy to stimulate the economy would be to
A)Raise taxes to increase aggregate demand.
B)Increase the money supply to increase aggregate supply.
C)Increase government expenditures to increase aggregate demand.
D)Lower taxes to increase aggregate supply.

Question

Quizplus · Accepted Answer

According to Keynesian theory, during times of economic downturn, when there is a gap between aggregate demand and aggregate supply, the government can use fiscal policy to stimulate the economy. The correct fiscal policy in such a case would be to increase government expenditures, which would lead to an increase in aggregate demand. This increase in demand would result in increased economic activity and output, which in turn would lead to higher employment and income levels. Therefore, option C is the correct choice. Options A, B, and D are incorrect as they do not align with the Keynesian theory of economics.

According to Keynesian Theory,the Correct Fiscal Policy to Stimulate the Economy