Which of the following did Keynes think was a macroeconomic problem?
A) The economy can tend toward an equilibrium level of output that is below the potential level.
B) The economy tends toward a potential level of output that is below the equilibrium level.
C) The economy makes the potential and equilibrium levels of output equal.
D) The economy can be pushed below the equilibrium level of output by fiscal policy.

Question

Which of the following did Keynes think was a macroeconomic problem?  
A) The economy can tend toward an equilibrium level of output that is below the potential level. 
B) The economy tends toward a potential level of output that is below the equilibrium level. 
C) The economy makes the potential and equilibrium levels of output equal. 
D) The economy can be pushed below the equilibrium level of output by fiscal policy.

Quizplus · Accepted Answer

Keynes believed that the economy could tend toward an equilibrium level of output that is below its potential level, which he called "underemployment equilibrium." This was a major macroeconomic problem that he sought to address through his theories of aggregate demand and government intervention.

Which of the Following Did Keynes Think Was a Macroeconomic