Question

According to Keynesian theory, what happens when aggregate demand increases?

Options

• Production decreases and jobs reduce

• Sales rise, leading to more production, jobs, and higher income

• Imports always exceed exports

• Government spending falls

Answer 1

Sales rise, leading to more production, jobs, and higher income

Explanation: 

Higher AD boosts sales, prompting firms to increase output, hire more workers, and raise national income in the short run.