Asked by Hannah Strength on Apr 30, 2024
Verified
John Maynard Keynes believed that a recession was caused entirely by
A) inadequate aggregate supply.
B) inadequate aggregate demand.
C) too much inflation.
D) too much government intervention.
Inadequate Aggregate Demand
A situation where the total demand for goods and services in an economy is not sufficient to produce full employment.
Recession
A decline in real GDP for two consecutive quarters.
- Discern the core theories intrinsic to Keynesian economics, with a focus on how investment is determined.
- Scrutinize the repercussions of economic theories on the implementation of fiscal and monetary policies.
Verified Answer
AM
Abbas MoledinaMay 03, 2024
Final Answer :
B
Explanation :
Keynes believed that recessions were caused by a lack of demand, or a deficiency in aggregate demand. He argued that in times of recession, there is a reduction in consumption and investment, which leads to a decrease in aggregate demand. This, in turn, leads to a fall in output, employment, and income. Thus, the solution to a recession, according to Keynes, was to increase aggregate demand through government intervention, such as fiscal and monetary policies.
Learning Objectives
- Discern the core theories intrinsic to Keynesian economics, with a focus on how investment is determined.
- Scrutinize the repercussions of economic theories on the implementation of fiscal and monetary policies.
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