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Principles of Economics 2e

2nd Edition
Steven A. Greenlaw; David Shapiro
ISBN: 9781947172364

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BuyFindarrow_forward

Principles of Economics 2e

2nd Edition
Steven A. Greenlaw; David Shapiro
ISBN: 9781947172364
Textbook Problem

If the economy is suffering through a rampant inflationary period, would a Keynesian economist advocate for stabilization policy that involves higher taxes and higher interest rates? Explain your answer.

To determine

Keynes view point during high inflation period.

Explanation

Keynes believed in implementing policies to correct economic situation. As economy is experiencing high inflation, policy to be followed is increase in tax-rate and increase in interest rate. It also believed in achieving short-run equilibrium.

Moreover, Keynes believe in altering demand rather than supply. Any change in demand will lead to change in output and price level...

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