In The General Theory of Employment, Interest, and Money, Keynes rejected the idea that
A)a capitalist economy always gravitates toward high levels of employment.
B)budget deficits necessarily cause recessions and inflation.
C)the ultimate breakdown of the capitalist system is inevitable.
D)international trade always helps to achieve economic stability.

Question

Quizplus · Accepted Answer

Keynes rejected the idea that the capitalist economy always gravitates toward high levels of employment, which was a fundamental belief of classical economics. He argued that in the short run, the economy could face persistent unemployment due to various factors, including inadequate aggregate demand.

Answer: B 
 Keynes also challenged the classical view that budget deficits necessarily cause recessions and inflation. He believed that government spending could stimulate economic activity, boost employment, and increase consumer and business confidence, thereby contributing to overall economic growth.

Answer: C 
 While Keynes was critical of some aspects of capitalism, he did not reject the system outright. Instead, he sought to improve and stabilize capitalist economies through macroeconomic policies such as monetary and fiscal policy. He believed that it was possible to achieve full employment and economic stability through appropriate government intervention.

Answer: D 
 Keynes recognized the potential benefits of international trade, but he also noted that trade imbalances and fluctuations in exchange rates could contribute to economic instability. He believed that countries should cooperate to manage global economic conditions and achieve more balanced trade relationships. Therefore, he did not categorically argue that international trade always helps to achieve economic stability.

In the General Theory of Employment, Interest, and Money, Keynes