Which Statement Is Consistent with the Keynesian Theory

question 84

Multiple Choice

Which statement is consistent with the Keynesian theory?

• A) Short-run economic fluctuations are caused by unstable aggregate demand; therefore, policy instruments should be used to stabilize the economy.
• B) Irrational waves of optimism would cause a reduction in aggregate demand and decrease unemployment.
• C) Changes in business and consumer expectations generally stabilize the economy.
• D) Changes in consumer confidence are irrelevant for the economy.

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Definitions:

Binomial Distribution

A probability distribution that summarizes the likelihood that a variable will take one of two independent values under a given set of parameters or conditions.

Independent Trials

Independent Trials are experiments or processes in which the outcome of any given trial does not affect the outcome of any other trial.

Poisson Distribution

A probability distribution that measures the probability of a given number of events happening in a fixed interval of time or space.