in the 1930s, when keynes was alive, a expansionary fiscal policy, taking everything else constant, would have led (in the short-run) to________a relative large increase in y, a smaller increase in pa relative large increase in p, a smaller increase in yboth y and p increasing with an percentageonly y increased
Question
in the 1930s, when keynes was alive, a expansionary fiscal policy, taking everything else constant, would have led (in the short-run) to________a relative large increase in y, a smaller increase in pa relative large increase in p, a smaller increase in yboth y and p increasing with an percentageonly y increased
Solution
In the 1930s, when Keynes was alive, an expansionary fiscal policy, assuming all other factors remain constant, would have led to a relatively large increase in output (Y), and a smaller increase in the price level (P) in the short run. This is based on Keynesian economics, which posits that increased government spending stimulates economic growth and can help pull an economy out of a recession. The increase in output is larger because the fiscal stimulus directly impacts demand and production, while the increase in price level is smaller because it is a secondary effect of increased demand.
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