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:

Associative Learning

The process by which an association between two stimuli or a behavior and a stimulus is learned.

Operant Conditioning

A teaching mechanism in which behavior is changed by applying incentives or consequences.

Classical Conditioning

Gaining understanding through the relationship between an environmental cue and an inherently present stimulus.

Operant Conditioning

A method of training in which the vigor of an action is influenced by rewards or sanctions.