Keynesian economists believe that in the short run
A)money neutrality exists and prices adjust rapidly.
B)money neutrality does not exist and prices adjust rapidly.
C)money neutrality exists and prices do not adjust rapidly.
D)money neutrality does not exist and prices do not adjust rapidly.

Question

Quizplus · Accepted Answer

Keynesian economists believe that in the short run, prices do not adjust rapidly and that there is a significant role for government intervention to stabilize the economy. This is because they do not believe in the concept of money neutrality, which suggests that changes in the money supply have no real effect on the economy. Instead, Keynesians argue that changes in the money supply can have real effects on output, employment, and inflation in the short run, making it necessary for the government to actively manage the economy through fiscal policy and monetary policy.

Keynesian Economists Believe That in the Short Run