On which of the following policies do Keynesians and monetarists agree? Fiscal policy is most effective...
On which of the following policies do Keynesians and monetarists agree?
- Fiscal policy is most effective in a very open economy.
- Monetary policy is less effective in a very open economy.
- Fiscal policy works directly through spending.
- Monetary policy works indirectly through spending.
Homework Answers
Keynesian and monetarists both agree that the fiscal policy works directly through spending (i.e., government spending).
But according to Keynesian expansionary fiscal policy can stimulate the economic activity in case of recession.
And according to monetarist fiscal policy does not cause long term increase in real GDP.
Answer: option (c).
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