alleryAccording to Keynes, fluctuations in economic activity are primarily caused by fluctuations in:
AThe supply of money
BAggregate effective demand
CAgricultural output
DThe pace of innovations
Answer & Solution
Correct answer: B. Aggregate effective demand
1. The chapter attributes to Keynes the view that fluctuations arise from changes in aggregate effective demand.
2. Higher demand raises output, income and employment; lower demand does the reverse.
3. So the correct choice is aggregate effective demand.
_Source: ICAI BoS CA Foundation Paper 4 Business Economics, Ch 5 "Business Cycles", p.7_
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