Consider two economists, Adam, a classical economist who lived in the 1920s, and
ID: 1209827 • Letter: C
Question
Consider two economists, Adam, a classical economist who lived in the 1920s, and Franco, a Keynesian, who lived in the 2000s. With which of the following statements would Adam agree? Check all that apply. Discretionary fiscal policy does more harm than good. The government should avoid running a deficit. The government's role in the economy should increase even at the expense of an unbalanced budget. All prices are flexible and will always move the economy to its potential output. With which of the following statements would Franco agree? Check all that apply. Only external shocks, such as wars or poor growing seasons cause economic crises. Flexible prices, wages, and interest rates always move the economy to its potential output in a timely fashion. Pessimism and grim business expectations can prevent firms from investing despite low interest rates. The economy is self-correcting and needs no government intervention. Suppose that in 2001, President George Bush sought Franco's advice about how to stimulate an economy suffering a recession What would Franco likely recommend? Increase interest rates. Increase government spending. Do nothing; rely on automatic stabilizers.Explanation / Answer
1. Discretionary fiscal policy does more harm
The Government should avoid running a deficit
All prices are flexible and will allways run the economy to
2.
Pessimism and grim business expectation can prevent frim from investing
3.
Increaase Government Spending.
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