QUESTION 1 Which of the following describes a possible Keyne

QUESTION 1 Which of the following describes a possible Keynesian solution to inflation? A tax increase on consumer income O A reduction in taxes for businesses that increase investment. O A surge in military spending O A major increase in what the U.S. government spends on healthcare QUESTION 2 Keynes believed that recessions would most likely be caused by: O Too little aggregate supply O Too little aggregate demand O Too much aggregate supply O Too much aggregate demand. QUESTION 3 During a recession, the aggregate demand curve O Stays the same O Shifts to the right O shifts upward oShifts to the left QUESTION 4 Which of the following does NOT affect consumption? O Disposable Income O Wealth O The availability of credit O All of the above DO affect consumption

Solution

1. To control inflation, Keynes suggests to prevent demand side growth by increasing tax on Consumers income.

Answer-option A

2. Keynes believed that the recessions would most likely be caused by too little aggregate demand, which shifts the AD curve leftward and as a result real GDP declines, creating a recessionary gap.

Answer-option B

3. During a recession, real GDP as well as Income of people declines. Consumers spending on Goods And services decreases and AD curve shifts to the left.

Answer-option D