SIE (Securities Industry Essentials) Practice Exam

What does Keynesian economic theory primarily deal with?

1. Controlling the economy through budget/government spending and taxation policies

2. Regulating the stock market and its associated financial instruments

3. Managing national defense and security measures

4. Overseeing the operations of private sector companies

The correct answer is: Controlling the economy through budget/government spending and taxation policies

Keynesian economic theory primarily deals with using government spending and taxation policies to control and stabilize the economy. This theory is focused on the role of the government in managing economic fluctuations and promoting overall economic stability. Option B, regulating the stock market, is a part of a different economic theory known as supply-side economics. Option C, managing national defense and security measures, is a function of government but not directly related to economic policy. Option D, overseeing private sector companies, is a function of regulatory agencies and does not pertain to economic theory. Hence, option A is the most accurate and relevant answer.