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Keynes' Notion of an Underemployment Equilibrium

MACRO-L71SXZ

Which of the following statements is true regarding John Maynard Keynes’ notion of the existence of an underemployment equilibrium?

A

Investment and savings are always equal no matter the level of output. A situation of excess labor supply will immediately cause wages to fall dramatically and clear the labor market.

B

Investment does not automatically change to equate with savings at the full-employment level of output. A situation of excess labor supply does not necessarily mean wages will fall.

C

Investment and savings are never equal no matter the level of output. A situation of excess labor supply will immediately cause wages to fall dramatically and clear the labor market.

D

Investment and savings are irrelevant when there is an underemployment of resources. A situation of deficient demand for labor will immediately be corrected but only in the short-run.