The intertemporal substitution effect is the factor that creates business cycles in the Keynesian theory of the business cycle.

Question

Quizplus · Accepted Answer

The intertemporal substitution effect is not the primary factor that creates business cycles in Keynesian theory; instead, Keynesian theory attributes business cycles mainly to changes in aggregate demand influenced by factors such as investment, government policy, and consumer confidence.

The Intertemporal Substitution Effect Is the Factor That Creates Business