According to Keynesian theoryA) changes in the equilibrium interest rate will not always equate saving and investment.B) prices and wages are flexible downward.C) Say's law is valid.D) savers and investors have identical motives.

Question

Nathan Carroll · Accepted Answer

Final Answer : A, Explanation :  According to Keynesian theory, changes in the equilibrium interest rate will not always equate saving and investment. Keynes argued that in a recession, there may be an excess supply of savings and a deficiency of investment, which leads to unemployment and economic stagnation. Therefore, Keynesian economics emphasizes the role of government intervention in stimulating demand and maintaining full employment.B, C, and D are incorrect:B) Keynesians believe that prices and wages are sticky and inflexible downward, which can lead to persistent unemployment and economic decline.C) Say's Law, which states that supply creates its own demand, is rejected by Keynesians who argue that demand can sometimes fall short of supply, leading to economic downturns.D) Keynesians recognize that savers and investors may have different motives and behaviors, such as saving for precautionary purposes rather than investing for profit.

According to Keynesian theory

A) changes in the equilibrium interest rate will not always equate saving and investment.
B) prices and wages are flexible downward.
C) Say's law is valid.
D) savers and investors have identical motives.

Definitions

Learning Objectives

Learning Objectives

Related questions