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Chapter 11: 17 (page 291)

What is Keynes’ law?

Short Answer

Expert verified

Keynes’ law states that demand creates its own supply.

Step by step solution

01

Concept introduction

Aggregate demand is the total demand for all commodities by various entities in an economy.

02

Explanation

Keynes’ law was based on the short-run perception of consumers who demand the products in the economy. As the economy's need grows, so will the supply of goods, and it will be advantageous for manufacturers to offer items in response to the rising demand. Any aggregate demand would have an impact on price levels and output.

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Most popular questions from this chapter

What are the components of the aggregate demand (AD) curve?

Name some factors that could cause the SRAS curve to shift, and say whether they would shift SRAS to the right or to the left.

If households decide to save a larger portion of their income, what effect would this have on the output, employment, and price level in the short run? What about the long run?

In your view, is the economy currently operating in the Keynesian, intermediate or neoclassical portion of the economy’s aggregate supply curve?

How is long-term growth illustrated in an AD/AS model?
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