Deficit Spending - AP Macroeconomics

The correct answer is that a Keynesian Economist would be most likely to advocate increased spending on public infrastructure if the economy was in recession, even if such an increase results in an increase in budget deficits.

The reason for this is that the Keynesians believe that such an increase in public works spending will lead to an increase in aggregate demand.

John Maynard Keynes began arguing forcefully in the 1920s that spending in a deficit would actually help a country get out of an economic depression. The Great Depression of the 1930s saw many governments put Keynes' theories to the test, often with economic success. This time period is often known as the Keynesian Revolution.

The national debt is the accumulation of national deficits, tabulated every fiscal year.

Therefore, if the national debt at the beginning of the year is $1000 and the deficit for that year is $100, the accumulated nation deficit is $1000+$100=$1100.

If you selected $900, you may have subtracted the deficit that year rather than adding it.

If you selected $100, you may have mistaken the national deficit for the national debt.

If you selected $1000, you may have forgotten to include the new deficit of $100 into the calculation of national debt.

The correct answer is that an increase in interest rates would weaken the multiplier effect. The reason is that an increase in interest rates would make it more attractive for consumers to save money, so as a result, there would be less of a propensity to consume.

A balanced budget law is pro-cyclical because when the economy enters a recession (GDP decreases), the amount of production the government is able to tax decreases, leading to a decrease in government revenue. The government is unable to spend at a deficit, so the government must decrease expenditures. Government expenditures make up a substantial portion of GDP, so GDP decreases even more.

The correct answer is that a Keynesian Economist would be most likely to advocate increased spending on public infrastructure if the economy was in recession, even if such an increase results in an increase in budget deficits.

The reason for this is that the Keynesians believe that such an increase in public works spending will lead to an increase in aggregate demand.

John Maynard Keynes began arguing forcefully in the 1920s that spending in a deficit would actually help a country get out of an economic depression. The Great Depression of the 1930s saw many governments put Keynes' theories to the test, often with economic success. This time period is often known as the Keynesian Revolution.

The national debt is the accumulation of national deficits, tabulated every fiscal year.

Therefore, if the national debt at the beginning of the year is $1000 and the deficit for that year is $100, the accumulated nation deficit is $1000+$100=$1100.

If you selected $900, you may have subtracted the deficit that year rather than adding it.

If you selected $100, you may have mistaken the national deficit for the national debt.

If you selected $1000, you may have forgotten to include the new deficit of $100 into the calculation of national debt.

The correct answer is that an increase in interest rates would weaken the multiplier effect. The reason is that an increase in interest rates would make it more attractive for consumers to save money, so as a result, there would be less of a propensity to consume.

A balanced budget law is pro-cyclical because when the economy enters a recession (GDP decreases), the amount of production the government is able to tax decreases, leading to a decrease in government revenue. The government is unable to spend at a deficit, so the government must decrease expenditures. Government expenditures make up a substantial portion of GDP, so GDP decreases even more.

The correct answer is that a Keynesian Economist would be most likely to advocate increased spending on public infrastructure if the economy was in recession, even if such an increase results in an increase in budget deficits.

The reason for this is that the Keynesians believe that such an increase in public works spending will lead to an increase in aggregate demand.

John Maynard Keynes began arguing forcefully in the 1920s that spending in a deficit would actually help a country get out of an economic depression. The Great Depression of the 1930s saw many governments put Keynes' theories to the test, often with economic success. This time period is often known as the Keynesian Revolution.

The national debt is the accumulation of national deficits, tabulated every fiscal year.

Therefore, if the national debt at the beginning of the year is $1000 and the deficit for that year is $100, the accumulated nation deficit is $1000+$100=$1100.

If you selected $900, you may have subtracted the deficit that year rather than adding it.

If you selected $100, you may have mistaken the national deficit for the national debt.

If you selected $1000, you may have forgotten to include the new deficit of $100 into the calculation of national debt.

The correct answer is that an increase in interest rates would weaken the multiplier effect. The reason is that an increase in interest rates would make it more attractive for consumers to save money, so as a result, there would be less of a propensity to consume.

A balanced budget law is pro-cyclical because when the economy enters a recession (GDP decreases), the amount of production the government is able to tax decreases, leading to a decrease in government revenue. The government is unable to spend at a deficit, so the government must decrease expenditures. Government expenditures make up a substantial portion of GDP, so GDP decreases even more.

The correct answer is that a Keynesian Economist would be most likely to advocate increased spending on public infrastructure if the economy was in recession, even if such an increase results in an increase in budget deficits.

The reason for this is that the Keynesians believe that such an increase in public works spending will lead to an increase in aggregate demand.

John Maynard Keynes began arguing forcefully in the 1920s that spending in a deficit would actually help a country get out of an economic depression. The Great Depression of the 1930s saw many governments put Keynes' theories to the test, often with economic success. This time period is often known as the Keynesian Revolution.

The national debt is the accumulation of national deficits, tabulated every fiscal year.

Therefore, if the national debt at the beginning of the year is $1000 and the deficit for that year is $100, the accumulated nation deficit is $1000+$100=$1100.

If you selected $900, you may have subtracted the deficit that year rather than adding it.

If you selected $100, you may have mistaken the national deficit for the national debt.

If you selected $1000, you may have forgotten to include the new deficit of $100 into the calculation of national debt.

The correct answer is that an increase in interest rates would weaken the multiplier effect. The reason is that an increase in interest rates would make it more attractive for consumers to save money, so as a result, there would be less of a propensity to consume.

A balanced budget law is pro-cyclical because when the economy enters a recession (GDP decreases), the amount of production the government is able to tax decreases, leading to a decrease in government revenue. The government is unable to spend at a deficit, so the government must decrease expenditures. Government expenditures make up a substantial portion of GDP, so GDP decreases even more.