Question

12. Keynes said that to fight a recession the government should. A. decrease transfer payments. B....

12. Keynes said that to fight a recession the government should.

A. decrease transfer payments.

B. conduct expansionary fiscal policy (decrease taxes and/or g increase government spending).

C. conduct contractionary fiscal policy (increase taxes and/or decrease government spending).

D. do nothing.

             

13. An increase in disposable income would lead to

A. increase in the DLF

B. decrease in the DLF

C. increase in the SLF

D. decrease in the SLF

14. A recession would lead to

A. increase in DLF

B. decrease in DLF

C. increase in SLF

D. decrease in SLF

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Homework Answers

Answer #1

12) Keynes was a firm supporter of government intervention and so he believed that only government through its expansionary policies can resurrect the economy Option B

13) Increase in disposable income will increase consumption and saving so we expect more funds supplied in loanable funds market. Option C

14) Recession would result in shrinking economic operations so investment demand will fall. This would result in decreasing the demand for loanable funds by businesses. Option B.

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