Which of the following statements does not hold true in case of the Keynesian economics?
A)velocity of money is an unstable function of its determinant
B)labor is subject to money illusion
C)as function tends to become flat at levels of output well below full employment and to become steeper ad full capacity is reached
D)as schedule is vertical, and output, and employment are completely supply determined.

Question

Quizplus · Accepted Answer

Keynesian economics posits that demand, rather than supply, is the primary driving force in the economy. This means that output and employment levels are largely determined by aggregate demand, not just by the supply side of the economy. Statement D, which suggests that output and employment are completely supply determined (implying a vertical aggregate supply curve), contradicts this fundamental Keynesian principle. In Keynesian theory, the aggregate supply curve can have different slopes at different levels of output, particularly becoming more inelastic near full capacity, but it does not posit a completely vertical supply curve at all levels of output.

Which of the Following Statements Does Not Hold True in Case