Question

1 pts D Question 9 Let's assume that the economy is experiencing a recession. A government economist advises the president to put pressure on the Federal Reserve Chair to increase the money supply. She also recommends for the government to increase spending on Social Security, welfare programs, roads, highways and other construction projects. According to our text, what are potential disadvantages if this recommendation is implemented? The economy will grow too fast in the short run and unemployment will fall below the full employment level. The money is not going to the people who really need it. Increases in the money supply usually only help wealthy bankers in the financial markets. Increasing spending on domestic programs and for Infrastructure aid mostly the suppliers of these programs. Economic growth will be too slow in the long run, causing Inflation to increase. Increasing the money supply causes Inflation in the long run. Also, increasing government spending means higher taxes or an increased budget defcit.

Answer 1

Answer :- Option 'd' is the correct Answer

If the given recommendation is implemented, the potential disadvantages will be, Increasing the money supply causes inflation in the long run. Also, increasing government spending means higher taxes or an increased budget deficit.

According to Keynes, a decrease in the money supply will raise interest rates and slow down economic growth.

According to Keynes, The Great Depression could have been prevented if the government had taken a more active role in the economy