Combating a recession using expansionary fiscal policy

Combating a recession using expansionary fiscal policy -...

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Combating a recession using expansionary fiscal policy.  Keynesian theories of output and  employment were developed in the midst of the Great Depression of the 1930s, when unemployment  rates in the U.S. and Europe exceeded 25% and the growth rate of real GDP declined steadily for  most of the decade. Keynes and his  followers believed that the way to combat the prevailing 
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Unformatted text preview: recessionary climate was not to wait for prices and wages to adjust but to engage in expansionary fiscal policy instead. The Keynesians' argument in favor of expansionary fiscal policy is illustrated in Figure 1 . Figure 1 Combating a recession using expansionary fiscal policy...
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This note was uploaded on 11/18/2011 for the course ECO 1310 taught by Professor Staff during the Fall '10 term at Texas State.

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