According to the Keynesian View, an Unanticipated Reduction in Spending

question 24

Multiple Choice

According to the Keynesian view, an unanticipated reduction in spending will

• A) increase the demand for goods and services.
• B) raise business inventories and lead to a decline in output.
• C) lead to lower interest rates, which will stimulate aggregate demand and keep the economy at full employment.
• D) lead to a lower price level, which will quickly guide the economy to full-employment equilibrium.

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Definitions:

Depression

A mental health disorder characterized by persistent sadness, loss of interest, and a range of emotional and physical symptoms, impacting daily functioning.

Positive Outcomes

Favorable or beneficial results or effects that stem from a particular action, situation, or intervention.

Obsession

Persistent, intrusive, and unwanted thoughts that cause distress or anxiety.

Compulsion

An irresistible urge to behave in a certain way, especially against one's conscious wishes.