Question

Keynes argued that: a) irrational waves of pessimism cause decreases in aggregate demand and increases in unemployment. b) irrational waves of optimism cause decreases in aggregate demand and decreases in aggregate supply. c) changes in business and consumer expectations generally stabilize the economy. d) All of the above are correct.

Answer 1

A) irrational waves of pessimism cause decreases in aggregate demand and increases in unemployment.

Step-by-step explanation:

This is because he believed that economics were more than just a social science, he believed that the way people behaves had a much bigger impact in economics than a lot of other factors. He believed that for a country to have good economy, it's government had to be empathic with the people.