Asked by kamlesh prajapati on May 25, 2024
Verified
Which of the following statements best reflects Keynes' view of the aggregate supply curve?
A) It tends to be vertical,because the economy naturally tends toward equilibrium positions of full employment.
B) It tends to be upward sloping (but not vertical) ,because as we try to produce more output out of our given resources,some labor has to work overtime at higher pay,driving up costs and prices.
C) It tends to be horizontal during periods when substantial amounts of resources are unemployed.
D) It tends to slope downward and to the right reflecting people's natural tendency to postpone purchases when they lose their jobs.
E) None of the choices are true of Keynes' view of the aggregate supply curve.
Aggregate Supply Curve
A graphical representation showing the relationship between the total supply of goods and services within an economy at different overall price levels.
Keynes' View
Refers to the economic theories and principles of John Maynard Keynes, emphasizing the role of government intervention in stabilizing the economy, particularly through fiscal and monetary policies.
Full Employment
A situation in an economy where all available labor resources are being used in the most efficient way possible, typically marked by the absence of involuntary unemployment.
- Understand the theoretical differences between classical economics and Keynesian economics.
- Familiarize with the notion of aggregate demand and aggregate supply curves, and their consequences for economic health.
Verified Answer
KH
Karan HindujaMay 29, 2024
Final Answer :
C
Explanation :
Keynes believed that during periods of high unemployment, the aggregate supply curve could be horizontal, indicating that the economy could produce more without leading to inflation, as there are unused resources (like labor).
Learning Objectives
- Understand the theoretical differences between classical economics and Keynesian economics.
- Familiarize with the notion of aggregate demand and aggregate supply curves, and their consequences for economic health.