According to Keynes, the economy could become stuck at a low income level if:
A)declines in aggregate demand and aggregate supply reinforce one another.
B)declines in aggregate demand are not accompanied by declines in aggregate supply.
C)declines in aggregate supply are not accompanied by declines in aggregate demand.
D)aggregate demand and aggregate supply are independent of one another.

Question

Quizplus · Accepted Answer

Keynes believed that declines in aggregate demand could lead to a downward spiral where reduced demand leads to lower production, which in turn leads to lower income and further reduced demand, potentially trapping the economy at a low income level.

According to Keynes, the Economy Could Become Stuck at a Low