Asked by Elizabeth Mata-lopez on May 25, 2024
Verified
Which of the following is true?
A) Keynes asked the question: If supply creates its own demand,why are we in a worldwide depression?
B) According to Keynes,if savings were greater than investment,interest rates would fall,bringing the economy back to full employment.
C) Keynes believed that wages and prices were flexible.
D) Keynes believed the economy was basically stable.
Keynes
Refers to John Maynard Keynes, an economist who is best known for his theories on the causes of prolonged unemployment and the influence of aggregate demand on the economy.
Worldwide Depression
A prolonged period of economic downturn that affects multiple countries and economies around the globe.
Interest Rates
The cost of borrowing money, typically expressed as a percentage of the amount borrowed, paid to lenders over a period.
- Acquire knowledge on the primary differences between classical and Keynesian economic ideologies.
- Ascertain the elements influencing investment decisions according to the Keynesian perspective.
Verified Answer
RV
Rakesh VinodMay 31, 2024
Final Answer :
A
Explanation :
Keynes asked this question in order to challenge the classical economic theory that stated that the economy would automatically stabilize itself through supply and demand. He argued that this model had failed during the Great Depression and that government intervention was necessary to recover economic stability.
Answer: B
This is the basic principle of the Keynesian theory of demand-side economics. Keynes believed that government intervention was necessary during times of economic recession or depression to stimulate demand and bring the economy back to full employment.
Answer: C and D are incorrect.
Keynes believed that prices and wages were sticky, meaning that they did not adjust quickly to changes in supply and demand. He also believed that the economy was not inherently stable and required government intervention to maintain stability.
Answer: B
This is the basic principle of the Keynesian theory of demand-side economics. Keynes believed that government intervention was necessary during times of economic recession or depression to stimulate demand and bring the economy back to full employment.
Answer: C and D are incorrect.
Keynes believed that prices and wages were sticky, meaning that they did not adjust quickly to changes in supply and demand. He also believed that the economy was not inherently stable and required government intervention to maintain stability.
Learning Objectives
- Acquire knowledge on the primary differences between classical and Keynesian economic ideologies.
- Ascertain the elements influencing investment decisions according to the Keynesian perspective.