CHAPTER 15
Keynesian Economics and the Great Depression
LEARNING OBJECTIVES
economy.
Explain how the government can act to stabilize the economy.
OUTLINE OF CHAPTER
KEY TERMS
macroeconomics
the study of the economy as a whole with primary interest in growth, unemployment, inflation,
ANSWERS TO END OF CHAPTER REVIEW QUESTIONS
Descri
economy.
1. What is macroeconomics?
2. w and then explain what it means in your own words.
3.
hold?
4. What are the two main things people can do with their income (money)?
Use it as a medium of exchange or save it.
5. What are the components of spending?
6.
into circulation?
Savings leaks out of circulation but re enters if spent on business investment.
7. What happens when there is not enough demand for the amount of goods produced?
Explain how the government can act to stabilize the economy.
8. How can the government offset a lack of private demand? How does this help prevent a
recession?
9. How could lower taxes, especially for middle and low-income households, help the
economy?
Lower taxes could increase income, which would increase spending.