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Question
The impact of 'Excess Demand' under the Keynesian theory of income and employment, in an economy, is ______
Options
Decrease in income, output, employment, and general price level.
Decrease in nominal income, but no change in real output.
Increase in income, output, employment, and general price level.
No change in output/employment but an increase in the general price level.
MCQ
Fill in the Blanks
Solution
The impact of 'Excess Demand' under the Keynesian theory of income and employment, in an economy, is no change in output/employment but an increase in the general price level.
Explanation:
Excess demand, according to Keynes' theory, has the following effects on output, employment, and the general price level:
- Output/employment - There is no change.
- General price level - Price levels rise as a result of excess demand.
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