Keynes said that even should monetary impotence not occur,full self-correction could be short-circuited by
A)the price level failing to fall sufficiently due to downwardly-rigid wages.
B)the price level failing to fall sufficiently due to continuously falling wages.
C)the price level falling too much due to downwardly-rigid wages.
D)the price level falling too much due to continuously falling wages.

Question

Quizplus · Accepted Answer

Keynes argued that downwardly-rigid wages could prevent prices from falling enough to stimulate demand and restore full employment. This means that even if monetary policy is effective, it may not be enough to achieve full self-correction in the economy. Option B, C, and D are incorrect as continuously falling wages or excessive wage cuts could exacerbate the problem of low demand and lead to further economic contraction.

Keynes Said That Even Should Monetary Impotence Not Occur,full Self-Correction