1. Which economic model posits that government intervention can lead to a net increase in demand, output, and income during a recession? - A) Classical - B) Keynesian - C) Monetarist - D) Supply-side Correct Answer: B) Keynesian Rationale: The Keynesian economic model suggests that during a recession, government intervention in the form of increased spending and lower taxes can stimulate demand, leading to increased output and income. 2. In the context of the IS-LM model, an increase in government spending would generally result in: - A) A shift of the IS curve to the right - B) A shift of the IS curve to the left - C) A movement along the IS curve - D) No shift in the IS curve Correct Answer: A) A shift of the IS curve to the right Rationale: In the IS-LM model, increased government spending shifts the IS curve to the right, indicating higher levels of income and output at each interest rate.