Given AD₁ and AS₁ in Figure 8.3,the Keynesian approach to achieving a higher level of output would be to A)Impose price controls. B)Increase the growth of the money supply to shift AS₁ to AS₂. C)Do nothing. D)Employ an expansionary fiscal policy.

Question

Quizplus · Accepted Answer

The Keynesian approach advocates for government intervention through expansionary fiscal policy. This would involve increasing government spending and/or reducing taxes to stimulate aggregate demand and shift the aggregate supply curve to the right, resulting in an increase in output. Therefore, the best choice would be to employ an expansionary fiscal policy. Options A and C are not effective approaches as price controls would lead to shortages or surpluses and doing nothing would not address the issue of low output. Option B, increasing the money supply, is a monetarist approach and not a Keynesian approach.

Given AD1 and AS1 in Figure 8

Given AD₁ and AS₁ in Figure 8