In the Keynesian model, if total spending by households, businesses, government units and foreign buyers is less than the total output produced in the economy, then:
A) total output will decrease.
B) total spending will increase as long as the economy is not at full employment.
C) total output will decrease and total spending will increase as long as the economy is not at full employment.
D) any of the above could happen.

Question

Quizplus · Accepted Answer

In the Keynesian model, if total spending is less than total output, inventories will build up, leading firms to reduce production. This results in a decrease in total output.

In the Keynesian Model, If Total Spending by Households, Businesses