In the Keynesian model, it is assumed that, when demand for a firm's product changes, the firm:
A) changes prices to meet the demand.
B) changes production levels to meet the demand.
C) changes prices and production levels to meet demand.
D) changes prices, but hold production levels constant to meet the demand.

Question

Quizplus · Accepted Answer

According to the Keynesian model, when demand for a firm's product changes, the firm would adjust its production level to meet the demand. The model assumes that firms have a relatively sticky price level in the short run, thus changing prices is not the primary response to changes in demand. Instead, they adjust their output levels to match the level of demand in the market.

In the Keynesian Model, It Is Assumed That, When Demand