AP Macroeconomics › How to find the effect of deficit spending on aggregate demand
If the economy is in severe recession, which of the following fiscal policies would a Keynesian economist most likely recommend?
An increase in government spending on public infrastructure, even if this spending results in greater budget deficits.
A decrease in government spending in order to offset the decrease in tax revenues that result from an economy in recession.
An increase in personal income taxes in order to help balance the budget.
A decrease in government transfer payments.