Conservatives and Keynesians differ on the appropriate response of the government to a recession. Which of the following is a true statement?
A) Keynesians believe that governments should increase spending to make up for a deficiency of aggregate demand.
B) Keynesians believe that governments should intervene in the economy only in the case of an outside shock.
C) Keynesians believe that governments do not need to intervene, because the economy is always in equilibrium.
D) Keynesians believe that governments can prevent an outside shock.

Question

Quizplus · Accepted Answer

Keynesians believe in increasing government spending during a recession, which would stimulate demand and help to bring the economy back to equilibrium. Conservatives, on the other hand, tend to favor a hands-off approach and believe that the government should not interfere with market forces.

Conservatives and Keynesians Differ on the Appropriate Response of the Government