Question

If the sum of individual and collective decisions leads to a level of output, prices, and employment that most people do not find satisfactory, Keynesians believe that __________.

A.) market forces will automatically and quickly correct mistaken decisions

B.) this outcome may persist because corrective market forces are ineffective

C.) government intervention will make things worse, so the role of government should be minimized

D.) government intervention is not necessary because market forces, although slow, move in the right direction

Answer 1

Keynesian believe that market forces have not self correcting mechanism which leads to full employment level of output, so they focus more on the intervention of the government through fiscal policy in order to achieve full employment level of GDP.

So if the sum of individual and collective decisions leads to a level of output, prices and employment that most people does not find satisfactory, Keynesian believe that this outcome may persist because corrective market forces are ineffective.

Answer: option (b).