The Keynesian approach assumes that
A) there is no unemployment in the economy.
B) the economy is self-regulating.
C) the government budget is always in deficit.
D) the price level does not change.

Question

Quizplus · Accepted Answer

The Keynesian approach assumes that in the short run, changes in aggregate demand can have significant impacts on output and employment levels. Therefore, it does not assume that the economy is self-regulating and acknowledges the existence of unemployment. However, it does assume that the price level is relatively stable in the short run, which is why the correct answer is D.

The Keynesian Approach Assumes That