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John Maynard Keynes and his followers argued that: A. the classical model does a good job...

John Maynard Keynes and his followers argued that:

A. the classical model does a good job of explaining the economy's operation in both the short run and long run.

B. the short run is unimportant so economists should focus their attention on the long run.

C. the economy should be allowed to function with minimal government interference.

D. the economy operates the same way in both the short run and long run.

E. while the classical model might explain economic performance in the long run, the long run could take a long time to reach.

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Answer #1

Correct option is E.

Answer A is incorrect as according to Keynes and his followers classical model fails to explain how economy operates in the short run. classical economists believed that prices and wages are flexible. Keynes and his followers said that prices and wages are rigid in the short run

Answer B is also incorrect as Keynes focussed on short run

Answer C is also incorrect as Keynes believed in government interference when the economy is in depression. he was in favour of role of government in improving economy

Answer D is incorrect. his short run and long run analysis of economy is not the same

answer E is correct: he said that classical model of wage and price flexibility may hold in the long run, but the long run could take long time to reach.

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