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:

Firm Produces

The process where a business uses its resources to create goods or services that can be sold in the market.

Marginal Cost

The cost of producing one additional unit of a product or service.

Marijuana

A psychoactive drug from the Cannabis plant used for medical or recreational purposes, known for its sedative and psychoactive effects.

Shipment Seized

This refers to the confiscation or taking hold of goods by authorities, usually due to regulatory or legal issues.