Question

(05.01 MC) This quotation best supports which of the economic theories of John Maynard Keynes? A. Businesses and jobs rely most strongly on consumer demand. B.Government regulation is necessary to stabilize the economy. C. Markets operate best when allowed to operate freely.D. Private individuals can best make their own economic decisions.

Answer 1

Answer:

The correct answer is letter "B": Government regulation is necessary to stabilize the economy.

Explanation:

Keynesian Economics, named after the British economist John Maynard Keynes (1883-1946), is a school of thought in which government plays an important role in mitigating economic recessions. Keynes concluded that governments had to drive the economic tide to lessen the effect of the cycles of boom and bust that are inevitable in a free-market economy.

Answer 2

Answer:

These two statements are correct:

A. Businesses and jobs rely most strongly on consumer demand.

B.Government regulation is necessary to stabilize the economy.

Explanation:

The first statement is correct because John Maynard Keynes that demand was the most important side of the economy, not supply. This is why his policies are sometimes referred to as "demand-side economics", while the policies of many of his detractors, such as Milton Friedman, are referred to as "supply-side economics".

The second statement is also correct because Keynes believed that a market economy was naturally subject to business cycles: cycles of boom and bust that could either benefit millions, or harm millions. Keynes thought that the government should regulate the economy in order to lessen the effect of those cycles.