In the Keynesian business cycle theory, business cycles begin with changes in
A) business confidence.
B) the publicʹs expectations about Fed policies.
C) consumer sentiment.
D) inflation expectations.

Question

Quizplus · Accepted Answer

According to Keynesian business cycle theory, fluctuations in business confidence play a key role in causing business cycles. This is because changes in confidence can affect investment decisions, leading to fluctuations in aggregate demand and ultimately impacting the level of economic activity. The other options (B, C, D) may also have some influence on business cycles, but they are not considered to be the primary driver according to Keynesian theory.

In the Keynesian Business Cycle Theory, Business Cycles Begin with Changes