The unemployment in the Keynesian model is caused by:

Question

Accepted Answer

The correct option is 4: Demand deficiency.

John Maynard Keynes revolutionized macroeconomics by arguing that during a recession or depression, unemployment is primarily caused by a lack of aggregate demand in the economy. This is often termed "Deficient Demand" or "Cyclical Unemployment." If the total planned spending (Aggregate Demand) by households, firms, government, and the foreign sector is less than the level of output (Aggregate Supply) required to achieve full employment, firms will reduce production and lay off workers, leading to involuntary unemployment. In the Keynesian view, wages and prices are sticky in the short run, meaning they do not adjust downwards quickly enough to restore full employment, thus necessitating government intervention (fiscal or monetary policy) to boost aggregate demand.

The incorrect option is 1: Supply sufficiency.
Supply sufficiency is an unrelated concept. Unemployment in the Keynesian model is not an issue of having enough productive capacity (supply), but rather an issue of insufficient spending to utilize that capacity.

The incorrect option is 2: Demand sufficiency.
If there were demand sufficiency, the economy would be operating at or near full employment, contradicting the state of unemployment the question addresses. Demand sufficiency would be the solution or the characteristic of a healthy, fully employed economy in the Keynesian framework.

The incorrect option is 3: Supply deficiency.
Supply deficiency implies that the economy is incapable of producing enough output, which would lead to inflation rather than unemployment. The Keynesian model focuses on a situation where capacity exists (supply is available), but a lack of demand prevents it from being fully utilized.