Keynes Rejected the View That Lower Wages Would Direct a Recessionary

question 38

Multiple Choice

Keynes rejected the view that lower wages would direct a recessionary economy back to full employment because

• A) lower wages would cause the central bank to reduce the money supply and thereby prolong the recession.
• B) lower wages would stimulate inflation and thereby prolong the recession.
• C) market forces would quickly direct an economy back to full employment.
• D) powerful trade unions and large corporations made wages highly inflexible.

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