Which of the following would be a Keynesian solution for inflation?
A) Increase transfer payments to those people hurt by inflation
B) Decrease government expenditures and let the multiplier work
C) Restrict foreign imports into the country
D) Do nothing because the economy is inherently stable

Question

Quizplus · Accepted Answer

Keynesian economics suggests that during periods of inflation, one effective solution is to decrease government expenditures. This approach aims to reduce the aggregate demand in the economy, thereby helping to control inflation. The multiplier effect refers to the idea that a change in spending (in this case, a decrease in government spending) leads to a larger change in national income and aggregate demand.

Which of the Following Would Be a Keynesian Solution for Inflation