The Simple Keynesian Model Assumes That

question 347

Multiple Choice

The simple Keynesian model assumes that

• A) gross private domestic investment exceeds net investment by the capital consumption allowance.
• B) prices, especially the price of wages, are "sticky downward."
• C) there will never be any excess capacity in the short run.
• D) aggregate demand will always equal aggregate supply.

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Definitions:

Marginal Social Cost

The total cost to society of producing one additional unit of a good or service, including both private costs and externalities.

Marginal Social Benefit

The additional benefit that society gains from consuming an additional unit of a good or service.

Government Intervention

Actions taken by a government to affect or interfere with economic activity, often to correct market failures and promote economic welfare.

Pollution

The presence or introduction into the environment of contaminants or substances that cause harm or discomfort to organisms, including humans.