Answer to Question #94280 in Macroeconomics for Nomthandazo

Question

which one of the following statement regarding the assumption of the Keynesian model
(1) the simple Keynesian model can be used to study inflation
(2) the simple Keynesian model can be used to explain the working of the labour market
(3) the simple Keynesian model can be used to study monetary policy
(4) in the simple Keynesian model prices, wages, money supply and the interest rate are given meaning that value is determined outside the model

Answer 1

(1)  the simple Keynesian model can be used to study inflation

Keynesian model refers to an economic theory which states an economy total spending and its effect on inflation and output. Thus, the simple Keynesian model can be used to study inflation in the economy.