9
practice testMultiple Choice

Practice Test

Question 9 • Economics

Which best describes a difference between the views of Milton Friedman and John Maynard Keynes on the economy?

Answer
A
Keynes believed the economy was too complicated to think of aggregates, while Friedman said higher aggregate demand could solve issues.
B
Friedman said that monetary policy should be used to influence aggregate demand, while Keynes believed the best approach was fiscal policy.
C
Keynes believed in little government intervention in the economy, while Friedman said government should play an active role.
D
Friedman said that fiscal policy should be used to influence aggregate demand, while Keynes believed the best approach was monetary policy.

Explanation

Friedman, a monetarist, emphasized using monetary policy—especially managing the money supply—to influence economic activity and aggregate demand. Keynes argued that fiscal policy, such as government spending and taxation, was an effective way to address weak demand, particularly during a recession. So the best description is that Friedman favored monetary policy while Keynes favored fiscal policy.

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