Relate Keynes's Theory to the Answer Choices
Now that we know that Keynes believed that recessions are caused by inadequate aggregate demand, let's examine the given answer choices:a) inadequate aggregate supply: This option refers to a shortage of goods and services in the economy. While this can be a part of the problem during recessions, it is not the primary issue that Keynes focused on.b) inadequate aggregate demand: This option directly refers to the lack of overall demand in the economy, which closely aligns with Keynes's theory.c) too much inflation: Inflation refers to a general increase in prices for goods and services, leading to a decrease in purchasing power. However, Keynes's primary focus was on aggregate demand insufficiency, not the inflation levels.d) too much government intervention: This option opposes Keynes's theory, as Keynes advocated for increased government intervention to stimulate demand during recessions.
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