Question

When output and employment slowed in early 2008, the Bush Administration and the Democratic Congress passed a legislation sending households a check for $600 for each adult (and $300 per child). These checks were financed by borrowing. Would a Keynesian favor this action? Why or why not?

Answer 1

Answer:

Yes, the Keynesian economists would favor this action.

Explanation:

Keynesians argue that in times of recession, the aggregate demand should be increased through government policies so that the economy recovers and output increases. The policy by Bush government put more money in the hands of people and as such their purchasing power increased. This increase in purchasing power would lead to an increase in aggregate demand according to the Keynesians.