Question

analyze the economic theory behind fdrs deficit spending approach. why did keynesian economics suggest this was an appropriate response to

a government spending would increase the money supply, making more credit available to businesses

b deficit spending would force other countries to loan money to the united states

c government spending would stimulate demand, create jobs, and restart economic activity

d deficit spending would cause inflation, which would make debts easier to repay

Explanation:

Keynesian economics emphasizes that during economic downturns, government intervention through spending can boost aggregate demand. When the government spends (even if it leads to a deficit), it can create jobs (e.g., infrastructure projects hire workers). More employed people have income to spend, which stimulates demand for goods and services. This increased demand encourages businesses to produce more, further restarting economic activity. Option A is more related to monetary policy (like actions of the central bank to manage money supply) rather than Keynesian fiscal policy (government spending/taxation). Option B is incorrect as deficit - spending doesn't "force" other countries to loan. Option D, while inflation can erode debt value, it's not the main tenet of Keynesian economics in the context of deficit - spending for economic recovery.

Answer:

C. Government spending would stimulate demand, create jobs, and restart economic activity