Which of the following does not impact aggregate demand in the ...

[a0266361136]

Which of the following does not impact aggregate demand in the Keynesian model?
 
  a. Changes in the supply of labor
  b. Net exports
  c. Household consumption
  d. Desired business investment demand
  e. Government purchases of goods and services

Question 2

Why is responding to a financial crisis by bailing out financial institutions more effective than direct support of nonfinancial businesses?
 
  What will be an ideal response?

[lindahyatt42]

Answer to Question 1

A

Answer to Question 2

In the wake of a financial crisis, many businesses find it difficult to cover operating expenses and would welcome direct financial support. However, business subsidies or tax credits and measures to stimulate demand address only the symptoms of the economic downturn. Direct aid to businesses may allow them to survive, but does not bring the economy beyond the crisis. The underlying problem is the inability of financial institutions to identify productive opportunities worthy of financial support. The value of financial assets and, especially, the viability of surviving financial institutions must be clarified to bring the crisis to an end.