When the spending of consumers, businesses, government, and foreigners (net exports) is less than the aggregate output level of the economy, the Keynesian model result is that:
A) output will rise.
B) output will fall.
C) prices will rise.
D) inventories will tend to decline.

Question

Quizplus · Accepted Answer

In the Keynesian model, when spending of consumers, businesses, government, and foreigners (net exports) is less than the aggregate output level of the economy, it leads to a decrease in aggregate demand. This, in turn, results in decreased production, which leads to a decrease in output. Therefore, the correct answer is option B: output will fall.

When the Spending of Consumers, Businesses, Government, and Foreigners (Net