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Over which time horizon does Keynes' law, that demand creates its own supply, apply fairly well?
AThe long run of decades or more
BIt never applies at any time horizon
COnly in centrally planned economies
DThe short run of a few months to a few years
Answer & Solution
Correct answer: D. The short run of a few months to a few years
1. Keynes developed his argument by looking at the Great Depression, a short-run collapse in demand.
2. In a recession or a boom lasting months to a couple of years, firms react mainly to how much demand they see.
3. Over that horizon, total demand strongly shapes how much output and employment the economy actually produces.
4. The long run is reserved for Say's law instead, so option A names the wrong horizon.
_Source: OpenStax Principles of Macroeconomics for AP Courses (CC BY 4.0), Ch 10 "The Aggregate Demand/Aggregate Supply Model", section 10.1 | Macroeconomic Perspectives on Demand and Supply_
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