According to Keynesian Theory

question 24

Multiple Choice

According to Keynesian theory,

• A) sticky prices and wages do not have an effect on aggregate expenditures.
• B) because of sticky prices and wages, changes in total spending have the biggest impact on output and employment.
• C) wage and price stickiness cause output and employment to remain close to their full employment levels, even when total spending changes.
• D) wages and prices fall in the early stages of a recession even when total spending is declining.

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Definitions:

Arbitrage Opportunities

Financial opportunities that arise from price differences of the same asset in different markets, allowing for profit without risk.

Transaction Costs

Expenses incurred when buying or selling securities, including broker fees and spreads.

Theorem

A theorem is a statement or proposition that has been proven on the basis of previously established statements, such as axioms or other theorems, in the context of mathematics or logic.

Prices

The monetary value assigned to goods, services, or assets in a market, which can be influenced by supply and demand dynamics, production costs, and external market conditions.