To explain the existence of excess capacity, Keynes argued that
A) prices and wages are flexible, and eventually markets would go back to equilibrium.
B) the long run average cost curve should not occur at the full employment level.
C) the aggregate demand curve can be manipulated by advertising.
D) prices and wages are inflexible in the downward direction.

Question

Quizplus · Accepted Answer

Keynes argued that excess capacity exists because prices and wages are inflexible in the downward direction, preventing markets from clearing.

To Explain the Existence of Excess Capacity, Keynes Argued That