Keynesian Theory and Policies Were Developed to Show Why

question 16

Multiple Choice

Keynesian theory and policies were developed to show why

• A)prolonged periods of unemployment were impossible
• B)prolonged periods of inflation were impossible
• C)unemployment could persist for long periods
• D)the interest rate ensures that saving equals investment
• E)flexible prices and wages ensure that a modern economy will enjoy prolonged periods of low unemployment and low inflation

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Definitions:

Stagflation

A situation in an economy where the inflation rate is high, the economic growth rate slows, and unemployment remains steadily high.

Output

The total amount of goods and services produced by an economy, business, or machine over a specific period of time.

Prices

The amount of money required to purchase goods or services, which can fluctuate based on demand, supply, and other economic factors.

Price Level

A measure of the average prices of goods and services in an economy at a specific time, indicating the cost of living or inflation rate.