Question

Which of the following is NOT an assumption of the Keynesian model?

Options

• Price level is flexible and continuously changing

• Rate of interest is constant

• Price level is fixed

• Other variables remain constant (Ceteris Paribus)

Answer 1

The Keynesian model assumes Ceteris Paribus (other variables remain constant), a fixed price level, and a constant rate of interest. A flexible, continuously changing price level directly contradicts the model's fixed-price assumption.