Economics (AS & A Level) · Feb / March 2022 · Paper 32 · Question 26
9708Aggregate Demand and Aggregate Supply analysis
Which statement would be associated with Keynesian economic theory?
- AA change in the money supply is the main determinant of the rate of inflation.
- BWhen unemployment falls below its natural rate, there is upward pressure on prices.
- CTotal spending in the economy affects real output and employment in the short run.
- DWages and prices are flexible so output and employment will always return to its equilibrium rate.
As printed in the paper
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Correct answer: C. Total spending in the economy affects real output and employment in the short run.
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