Which of the following statements would Keynes have been most likely to agree with?
A) Saving is more responsive to changes in interest rates than to changes in income.
B) Say's law holds in both a barter and money economy.
C) The internal structure of the economy is not always competitive enough to allow prices to fall.
D) Investment is exclusively dependent upon the interest rate.
E) none of the above

Question

Quizplus · Accepted Answer

Keynes believed that in certain situations, such as during a recession, the internal structure of the economy is not competitive enough to allow prices to fall and therefore government intervention is needed to stimulate demand. He did not agree with statement A because he believed that consumption and income were more important factors in determining saving. He also did not agree with statement B because he rejected the idea of Say's law, which states that supply creates its own demand. Statement D is also not entirely accurate as investment is influenced by a variety of factors, not just the interest rate.

Which of the Following Statements Would Keynes Have Been Most