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Suppose the economy is in recession.
The federal government then begins running large budget deficits.
According to the functional finance/Keynesian view of fiscal policy, how will the deficits affect real GDP, employment, and the price level?
Explain in words and a graph.
Answer
Keynesian economics dictates that running budget deficits during a recession is an essential step, and that the government needs to pump cash into the economy in order to increase long-term GDP, employment, and the price level.
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Virtual Teaching Assistant: Colleen R.
Question Level: Basic
Karma: Free
Upload Date: 5/31/2017
This 42 words question was answered by Colleen R. on StudySoup on 5/31/2017. The question contains content related to Business Since its upload, it has received 109 views.