According to the Keynesian model:
A) the equilibrium is found by equating the output produced to aggregate demand.
B) the equilibrium is found by equating the inventories to aggregate demand.
C) the equilibrium is found by equating the investment to aggregate demand.
D) the equilibrium is found by equating the output produced to aggregate supply.

Question

Quizplus · Accepted Answer

In the Keynesian model, the equilibrium is found by equating the output produced to aggregate demand. This is because Keynes believed that in the short run, output is determined by aggregate demand, and that prices and wages are sticky, so they do not adjust quickly to changes in demand. Therefore, when aggregate demand is equal to output, there will be no excess supply or demand in the economy, and the economy will be in equilibrium.

According to the Keynesian Model