Question

Which of the following alternatives best summarizes the keynesian perspective of the ad/as model?

a) Long-term equilibrium is always achieved
b) Government intervention is unnecessary
c) Markets are inherently stable
d) Government spending can stabilize the economy

Answer 1

The Keynesian perspective of the AD/AS model emphasizes government intervention in stabilizing the economy through fiscal policy.

Step-by-step explanation:

The Keynesian perspective of the AD/AS model can be summarized as:

1. Government spending can stabilize the economy.
2. Keynesian macroeconomics argues for expansionary fiscal policy during a recession, such as tax cuts or direct increases in government spending to stimulate aggregate demand.
3. When the economy is operating above potential GDP, contractionary fiscal policy is recommended to reduce inflationary pressures.

Overall, the Keynesian perspective emphasizes the role of government intervention in stabilizing the economy through fiscal policy.