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According to the Keynesian economics, recession or depression in the world economy is considered to be...

According to the Keynesian economics, recession or depression in the world economy is considered to be the result of a negative shock to aggregate supply.

Is this statement true or false? And why?

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Answer:

False

According to the Keynesian economics, recession or depression in the world economy is considered to be the result of a lack of demand for goods and services, resulting in a lack of demand for labor. Keynesian economics believe that demand is the key driving force in the economy. Keynesian economics say that demand or Aggregate Demand (AD) is depend upon the consumption, government spending, investment and net export. Fiscal and monetary policy paly an important role to drive the AD. When a government follow an expansionary fiscal and monetary policy then its increase the AD that increased the total output or GDP and vice-versa (in case of contractionary policy) .

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