Keynesian theory was a response to the prevailing
A) classical theory that held that the economy could suffer from a period of sustained unemployment.
B) classical theory that held that the economy is self-correcting.
C) monetarist theory that held that the economy is self-correcting.
D) monetarist theory that held that monetary policy should be used to return the economy to its potential output.

Question

Quizplus · Accepted Answer

Keynesian theory was a response to the prevailing classical theory that held that the economy is self-correcting. Keynesians argued that the economy can experience prolonged periods of unemployment and that government intervention, particularly through fiscal policy, is necessary to stimulate aggregate demand and restore economic growth.

Keynesian Theory Was a Response to the Prevailing