A basic conclusion of Keynesian analysis is that
A)Small macro disturbances can lead to much larger macro problems.
B)The economy self-adjusts to reach full employment and a stable price level.
C)Equilibrium GDP is consistent with full employment.
D)Equilibrium GDP is consistent with price level stability.

Question

Quizplus · Accepted Answer

Keynesian analysis emphasizes that small disturbances in the economy, such as a decline in consumer spending or investment, can have a much larger impact on the overall economy, leading to recessions or even depressions. This is in contrast to the classical view that the economy self-adjusts to reach equilibrium without any government intervention. Keynesians argue that government policies, such as fiscal stimulus or monetary policy, can help to stabilize the economy and promote full employment.

A Basic Conclusion of Keynesian Analysis Is That