“According to Keynes, the economy is essentially a self-regulating system.” Do you agree or disagree? Why?

What will be an ideal response?


Disagree. The inflexibility of prices meant that changes in aggregate demand would affect output and employment rather than the price level. Involuntary unemployment was likely when aggregate demand decreased because the wage level would not adjust to bring about a new, full-employment equilibrium. Hence, the economy is not a self-regulating system according to Keynes.