Keynesian analysis suggests that a planned budget surplus
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A. B. C. D.Explanation
Keynesians support "counter-cyclical" polices: that is, under an inflationary/full capacity economy, the government should reduce spending (operate under a budget surplus) to contract aggregate demand and control economic growth so as to avoid high levels of inflation. Thus, a budget surplus is appropriate during periods of inflation. If such a policy is enacted when the economy is below full capacity, the proper counter-cyclical policy for the government is to deficit spend.
Thus, if the government operates under a budget surplus in this situation, aggregate demand will further contract and unemployment will increase.