Question

An important similarity between the Keynesian model and the AD/AS model is that:

A. in both models, prices change when there is a change in spending.

B. both models allow for government intervention in the short run.

C. both models predict that the economy will move towards full employment automatically.

D. in both models, the price level stays constant when there is a change in spending.

E. in both models real GDP stays constant when there is a change in spending.

Answer 1

B. both models allow for government intervention in the short run.

Step-by-step explanation:

Keynesian model - this model encourages the demand to increase the economy. This model believes that to boost the economy, an increase in consumer demand is a must.

it believe larger the investment in the demand more will be output, supply and less will be inflation. so for the increase in demand, Keynesians advise lowering the tax value.

AD-AS model is often called as demand-aggregate supply model. This model explain the relationship between the demand and aggregate supply.