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:

Equal Installments

Equal installments refer to payments of the same amount made periodically over the term of a loan or financing agreement.

Interest

The charge for borrowing money or the return on invested capital.

Nominal Annual Rate

The stated or face interest rate of a financial product, not adjusting for compounding or inflation over time.

Effective Annual Rate

This is the interest rate on an investment or loan that accounts for the effects of compounding over a given period, providing a more accurate picture of financial returns or costs.