Answer to Question #96869 in Macroeconomics for Tiffany

Question

True or False:
If the economy is near the full-employment level of output, the AD/AS analysis of a change in government spending or taxation will be different from the Keynesian analysis.

Answer 1

Keynesian economics is an economic theory of total spending in the economy and its effects on output and inflation. Keynes advocated for increased government expenditures and lower taxes to stimulate demand and pull the global economy out of the depression. So, the statement is false, because the AD/AS analysis of a change in government spending or taxation will not be different from the Keynesian analysis.