What did Keynes argue about aggregate demand?
A) Aggregate demand is stable because the economy returns to long-run equilibrium.
B) Aggregate demand is stable because changes in consumption are mostly offset by changes in investment and vice versa.
C) Aggregate demand is unstable and the government should actively stimulate aggregate demand when production is at less than its full employment level.
D) Aggregate demand is unstable and economies should be left to deal with short-run fluctuations on their own.

Question

Quizplus · Accepted Answer

Keynes argued that aggregate demand is unstable and the government should actively stimulate aggregate demand when production is at less than its full employment level through policies such as fiscal stimulus and monetary policy. This would help to reduce unemployment and bring the economy back to its potential output.

What Did Keynes Argue About Aggregate Demand