The Keynesian explanation of inflation is that
A) it is caused by aggregate demand rising faster than aggregate supply.
B) it is caused by aggregate supply rising faster than aggregate demand.
C) it is caused by an expansion of the money supply.
D) it is caused by rising costs of production during a time of deficient aggregate demand.

Question

Quizplus · Accepted Answer

According to Keynesian theory, inflation is caused by aggregate demand rising faster than aggregate supply. This occurs when there is too much money chasing too few goods, leading to upward pressure on prices. Keynesians argue that monetary and fiscal policies can be used to control inflation by reducing aggregate demand.

The Keynesian Explanation of Inflation Is That