The Keynesian view implies that there is a role for monetary and fiscal policy in stabilizing the economy in response to aggregate shocks because
A) prices and wages are slow to clear markets.
B) money is neutral.
C) comovement of aggregate variables does not generally happen during the business cycle.
D) business cycles have many causes.
E) these policies are highly effective in raising total factor productivity.

Question

Quizplus · Accepted Answer

The Keynesian view holds that prices and wages are slow to adjust, which leads to market imperfections and the potential for aggregate shocks to destabilize the economy. Fiscal and monetary policy can be used to counteract these effects and stabilize the economy.

The Keynesian View Implies That There Is a Role for Monetary