Keynes believed that abrupt changes in spending behavior
A)Have no effect on the economy.
B)Help stabilize the economy.
C)Lead to responses by market participants that may make the market outcome worse.
D)Move the economy to full employment.

Question

Quizplus · Accepted Answer

Keynes believed that abrupt changes in spending behavior would lead to responses by market participants that may make the market outcome worse. This is because sudden changes in spending can create uncertainty and instability in markets, causing investors and consumers to react impulsively rather than rationally, which can exacerbate economic problems. Therefore, Keynes argued that it is important to smooth out fluctuations in spending to avoid destabilizing the economy.

Keynes Believed That Abrupt Changes in Spending Behavior