Question

Question 6 2 pts According to the lecture slides, which of the following is true about John Maynard Keynes? O He hated economics O He believed the economy should be guided by markets and the government be kept out of the way He thought that recessions did not really happen but were only imagined OHe believed the long run means six months O He thought government spending would be useful during recessions to lift the economy Question 7 2 pts If the economy is in its initial equilibrium and then the Federal Reserve decides to sell government bonds, what is the effect in the long run (relative to the initial equilibrium) on the purchasing power of money (using the AD-AS model)? Increases Decreases Stays the same Unclear None of the above

Answer 1

Answer 6. He thought government spending would be useful during recession to lift the economy

Reason- John Maynard Keynes focused on the role of demand side policies like increased government spending or reduced taxes to pull the economy out of recession.

Answer 7. Decreases.

Reason- Open market sale, leads to fall in Money supply. It is a contractionary monetary policy. AD curve shifts left. Price level rises. So purchasing power falls.