AP US Government

Category - Public Policy

Look at the following list of economic theories. Which one encourages the government to create job opportunities for citizens during periods of high unemployment so that more money can get back into the hands of consumers, thereby stimulating the economic growth of the country?
  1. Keynesian economics
  2. Supply-side economics
  3. Reaganomics
  4. Military-industrial economics
Explanation
Answer: A - Keynesian economics encourages the government to create job opportunities for citizens during periods of high unemployment so that more money can get back into the hands of consumers, thereby stimulating the economic growth of the country. The Keynesian economics theory encourages the government to create jobs for people during periods of high unemployment. An English economist, John Maynard Keynes believed that it was beneficial for the government to create jobs during periods of high unemployment so that more money could get back into the hands of consumers. Keynes argued that the solution to depression was to stimulate the economy through reducing interest rates and investing in infrastructure. Doing so would put money back into the hands of consumers and stimulate economic growth.
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