Question

If Keynes’ law applies during economic contractions and Say’s law applies during economic expansion, how will the three goals of macroeconomics be affected?
a) trade-offs and connections may differ in the short run and the long run
b) the economy will face genuine limits to how much can be produced
c) determinates of total supply for the economy will be traded-off
d) institutional and market structures will connect factors of production

Answer 1

Answer:

Answer is option a, i.e. trade-offs and connections may differ in short run and the long run.

Explanation:

Keynes' law in economics and Say's law in economics are contradictory in their perspective. Where Keynes' law says that it is the demand that creates the supply, on the other hand, Say's law states that its the supply that tends to create the demand. But, we cannot neglect any of the above facts as demand and supply cant operate independently. So, on combining the two laws, we happen to take both the given laws into account. Also, it is found that Keynes' law is more appropriate and accurate for the short-run whereas, Say's law is for the long run. This thus creates trade-offs and connections that differ in the short-run and long-run by affecting the three important goals of macroeconomics, i.e. higher standard of living, low inflation, and low unemployment.