Question

Which of the following measures would a president adhering to Keynesian economic principles most likely employ during an economic recession?

i. A budget with significant cuts in federal spending on entitlement programs like Medicaid
ii. A budget that raises the federal interest rate from 1.65% to 1.8%
iii. A budget that cuts corporate income tax rates and decrease regulation of the economy
iv. A budget with significant additions of public work projects to provide employment for Americans without jobs

Answer 1

The measure that would be employed by the president is a budget that cuts corporate income tax rates and decrease regulation of the economy.

What is the president's response to a recession?

A recession is when the gross domestic product of a country for two consecutive quarters is negative. When there is a recession, the apporopriate response should be an expansionary policy.

Keynesian economics advocates for increasing consumer spending in a recession. This can be achieved through reducing taxes.