I ANSWERED OPTION A AND WAS INCORRECT Which of the following statements is true?

Question

I ANSWERED OPTION A AND WAS INCORRECT

Which of the following statements is true?

Question options:

Keynes believed wages and prices are often too flexible - falling wages can cause a recession.

Keynes believed an economy could get stuck in a recessionary gap.

Keynes advocated running government surpluses in times of recession.

Keynes believed the economy is self-regulating.

b and c

Keynes believed wages and prices are often too flexible - falling wages can cause a recession.

Keynes believed an economy could get stuck in a recessionary gap.

Keynes advocated running government surpluses in times of recession.

Keynes believed the economy is self-regulating.

b and c

Explanation / Answer

Keynes believed an economy could get stuck in a recessionary gap. This statement is true and if the economy gets stuck in a recessionary gap, then with the expansionary fiscal policy, the economy can come out of the recession.

Hence option b is the correct answer.

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