To Explain the Existence of Excess Capacity, Keynes Argued That

question 279

Multiple Choice

To explain the existence of excess capacity, Keynes argued that

• A) prices and wages are flexible, and eventually markets would go back to equilibrium.
• B) the long run average cost curve should not occur at the full employment level.
• C) the aggregate demand curve can be manipulated by advertising.
• D) prices and wages are inflexible in the downward direction.

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Definitions:

Synergy

The combined effect of two or more individuals, entities, or factors that is greater than the sum of their separate effects.

Indemnity

A contractual obligation of one party to compensate the loss incurred by the other party due to the acts of the indemnitor or other specified causes.

Reciprocity

Refers to a mutual exchange of privileges or benefits between two parties, where each party offers something in return for what is received, often seen in trade agreements.

Vertical Integration

A strategy where a company expands its operations by taking control of one or more stages in the production or distribution of a product.