In the Simple Keynesian Model

question 40

Multiple Choice

In the simple Keynesian model,

• A)Inflation becomes a problem only if demand increases at full employment.
• B)Inflation is a problem whenever demand increases.
• C)Inflation is never a problem.

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Definitions:

Aggregate Supply

The complete amount of products and services that businesses within a country's economy intend to sell over a certain period.

Long Run Aggregate Supply

Long run aggregate supply represents the total output of goods and services that an economy can produce when both labor and capital are fully employed, at their most efficient levels.

Expected Price Level

The forecasted average price across all goods and services in an economy, reflecting the expected general price environment.

Long-Run Aggregate-Supply

The total quantity of goods and services that producers in an economy are willing and able to supply at a full employment level, without any changes in the price level over the long term.