Keynes argued that aggregate demand is
A)stable,because the economy tends to return to its long-run equilibrium quickly after any disturbance to aggregate demand.
B)stable,because changes in consumption are mostly offset by changes in investment and vice versa.
C)unstable,because waves of pessimism and optimism create fluctuations in aggregate demand.
D)unstable,because of long and variable policy lags that worsen economic fluctuations.

Question

Quizplus · Accepted Answer

Keynes argued that aggregate demand is unstable because of fluctuations in optimism and pessimism that lead to changes in spending and investment. He believed that these waves of sentiment could cause significant fluctuations in the economy, leading to periods of recession and unemployment.

Keynes Argued That Aggregate Demand Is