Questions: Which of the following statements is true? a. Keynes believed an economy could get stuck in a recessionary gap. b. Keynes originated the idea of efficiency wages. c. Keynes believed wages are inflexible downward but prices (of goods and services) are flexible. d. Keynes believed the economy is self-regulating.

The answer is a. Keynes believed an economy could get stuck in a recessionary gap.

This statement is true. John Maynard Keynes argued that an economy could become stuck in a recessionary gap due to insufficient aggregate demand. He believed that without intervention, such as government spending, the economy might not naturally return to full employment.

This statement is false. The concept of efficiency wages, where higher wages can lead to increased productivity, is not originally attributed to Keynes. It is more closely associated with later economists like George Akerlof and Janet Yellen.

This statement is partially true but misleading. Keynes did argue that wages are often inflexible downward due to factors like contracts and worker morale. However, he also suggested that prices could be sticky, meaning they do not adjust quickly to changes in supply and demand, which can contribute to prolonged periods of unemployment.

This statement is false. Keynes challenged the classical economic view that the economy is self-regulating. He argued that without intervention, economies could remain in prolonged periods of high unemployment and low output.