Which statement is consistent with the Keynesian theory?
A) Short-run economic fluctuations are caused by unstable aggregate demand; therefore, policy instruments should be used to stabilize the economy.
B) Irrational waves of optimism would cause a reduction in aggregate demand and decrease unemployment.
C) Changes in business and consumer expectations generally stabilize the economy.
D) Changes in consumer confidence are irrelevant for the economy.
Correct Answer:
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