Impact of Government Expenditures and Budget Deficits on Economic Growth
Government Expenditures and Economic Growth
If strong growth is observed during a decade of increases in government expenditures and large budget deficits, this would be most consistent with the Keynesian view. The Keynesian view suggests that government spending can stimulate economic growth, even if it means running budget deficits. The correct option is a.
The Keynesian view is an economic theory associated with the ideas of John Maynard Keynes. According to Keynesian economics, during periods of economic downturns or recessions, the government should increase its spending and run budget deficits to stimulate economic activity and boost aggregate demand.
This approach is based on the belief that increased government spending can create a multiplier effect, leading to increased consumption, investment, and overall economic growth.
If strong growth is observed despite the projected increases in government expenditures and budget deficits, it suggests that the Keynesian policies of government spending and deficit financing have been effective in stimulating economic activity and driving growth.
The increased government spending has likely contributed to higher aggregate demand, which in turn leads to increased economic output and growth.
Suppose that increases in government expenditures and large budget deficits are projected for the next decade. If strong growth is observed during this decade, this would be most consistent with a. the Keynesian view.