Which of the following is true?
A)A recessionary gap can be cured in the long run if prices and wages remain stable.
B)A recessionary gap can be cured in the short run if prices and wages remain stable.
C)Recessionary gaps can be avoided if the economy grows fast enough.
D)Keynes believed that recessionary gaps will correct themselves because prices and wages are flexible.
E)Keynes believed that recessionary gaps will not correct themselves because prices and wages are not flexible.

Question

Quizplus · Accepted Answer

Keynes argued that in the face of a recessionary gap, prices and wages are often inflexible downwards, leading to prolonged periods of high unemployment and underutilized resources. He believed that without government intervention, these gaps would not correct themselves due to this inflexibility.

Which of the Following Is True