According to the Keynesian theory of income and employment,
A) the economy automatically tends toward equilibrium at the level of full employment.
B) the economy never tends toward equilibrium.
C) the economy may be in equilibrium at less than full employment.
D) the economy's level of employment is unrelated to its level of income.

Question

Quizplus · Accepted Answer

According to the Keynesian theory, the economy may be in equilibrium at less than full employment. This is because there may not be enough aggregate demand in the economy to generate full employment, and therefore, government intervention may be needed to stimulate demand and increase employment.

According to the Keynesian Theory of Income and Employment