According to Keynes,
A)fiscal policy should not be used to influence the economy
B)the economy eventually tends toward the potential output
C)to get the economy to potential output,the SRAS curve must shift to the right
D)the economy could be stuck at equilibrium below the potential output for a prolonged period
E)deviations from potential output are short-lived

Question

Quizplus · Accepted Answer

Keynes believed that the economy could be stuck in a state of equilibrium below potential output due to factors like low consumer confidence, lack of investment, and unemployment. He argued that during such times, fiscal policy, particularly government spending, could be used to boost aggregate demand and bring the economy back to potential output.