Keynesian economics became popular because it was able to explain ?
Correct answer: D. The prolonged existence of high unemployment during the Great depression
- A. stagflation in the late 1970s
- B. demand-pull inflation in the 1960s
- C. low growth rates in the 1950s
- D. The prolonged existence of high unemployment during the Great depression
Explanation
Keynesian economics gained prominence because classical theory could not adequately explain the prolonged mass unemployment of the Great Depression. Keynes linked unemployment to insufficient aggregate demand and supported active government intervention.
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The economy is studied as a whole through national income, gross domestic product, inflation, unemployment, economic growth and business cycles. Coverage includes aggregate demand and supply, consumption and investment, money and banking, fiscal and monetary policy, exchange rates and balance of payments, which distinguishes macroeconomics from the study of individual markets.
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