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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Definitions:

Par Value

A value assigned to a security or stock by the company that issues it, typically representing the minimum price the security can be sold for upon its initial offering.

Dividend

A portion of a company's earnings distributed to shareholders, usually in the form of cash or additional shares.

Cash Dividend

A payout from a company's profits, determined by the board of directors, given to a group of its stockholders as cash.

Stockholders' Equity

The residual interest in the assets of a corporation after deducting its liabilities, representing the ownership interest of shareholders.