1. In the mid 1970's in the USA, both inflation and recession occurred. This phenomenon is called
2. When the government cuts taxes in order to stimulate spending and the economy, which type of policy is being used?
a. Spending Policy
b. Monetary Policy
c. GDP Policy
d. Fiscal Policy
Keynesian (pronounce Canes-e-an) economics advocates government use of fiscal and monetary policies to grow (expand) or slow (contract) the macroeconomy. These policies work by trading off between inflation (stimulus will raise the inflation rate) and unemployment (contraction will increase unemployment). In the 1970s there was a problem that hadn't occurred before - simultaneous high inflation and high unemployment. It was later defined as stagflation.
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from College Macroeconomics: Tutoring SolutionChapter 5 / Lesson 12