Which of the Following Is Consistent with the Keynesian Theory

question 109

Multiple Choice

Which of the following is consistent with the Keynesian theory?

• A)Irrational waves of pessimism would cause a decrease in aggregate demand and increase unemployment.
• 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:

Risk Premium

The return in excess of the risk-free rate of return that investors demand for choosing a risky investment.

Small Companies

Businesses with relatively small market capitalization or revenues.

Average Returns

Refers to the mean financial return of an investment over a specified period, which includes dividends, interest, and capital gains.