Within the framework of the Keynesian model, which of the following would most likely occur if the federal government increased its spending and enlarged the size of the budget deficit during a period of full employment

Question

Business

Anton Friedman

3 January, 19:45

Within the framework of the Keynesian model, which of the following would most likely occur if the federal government increased its spending and enlarged the size of the budget deficit during a period of full employment

+1

Answers (1)

Know the Answer?

Evelin Jimenez · Answer 1

the rate of inflation would rise.

Explanation:

During a period of full employment people are fully employed and earning Salar. If the government increases spending there will be excess cash in the economy.

Consumers will be willing to spend more to buy goods and services. The supply will not be able to meet up with demand and goods become scarce, resulting in increase in price of goods.

Eventually inflation results as general prices of goods and services rises.