According to the Keynesian Model

question 218

Multiple Choice

According to the Keynesian model,

• A)wages are flexible because workers wouldn't otherwise be able to keep their jobs.
• B)the price level is somewhat fixed due to social forces, which keeps an economy from remaining at an equilibrium level of unemployment.
• C)prices are subject to significant fluctuations as demand and supply change.
• D)the government puts price controls on the economy, keeping the price level fixed.

---

Definitions:

Lemon Laws

Statutes designed to protect consumers from purchasing defective vehicles that fail to meet quality and performance standards.

Negative Externalities

Unintended and adverse side effects suffered by third parties or the environment as a result of economic activities.

Direct Controls

Government policies that directly constrain activities that generate negative externalities. Examples include maximum emissions limits for factory smokestacks and laws mandating the proper disposal of toxic wastes.

Economic Efficiency

A situation where resources are allocated in a way that maximizes the net benefit to society or achieves the desired output with the least waste.