Based on the neoclassical economics, when AD, aggregate demand goes down, in the long run, there will be: An increase in prices and an increase in output O An increase in prices and a return to potential GDP O A decrease in prices and a return to potential GDP O A decrease in prices and a decrease in output

Based on the neoclassical economics, when AD, aggregate demand goes down, in the long run, there will be: An increase in prices and an increase in output O An increase in prices and a return to potential GDP O A decrease in prices and a return to potential GDP O A decrease in prices and a decrease in output

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter24: The Aggregate Demand/aggregate Supply Model

Section: Chapter Questions

Problem 3SCQ: The short run aggregate supply curve was constructed assuming that as the price of outputs...

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If a neoclassical model shows increasing wages in the economy over the long run, what else will likely occur? inflationary increase in price level O short-run decrease in cyclical unemployment O change in government policy to decrease in aggregate demand O substantial short-term off-setting decrease in output
In the neoclassical model, if there is a sudden rise in the aggregate demand curve, in the short and long run it will cause O inflation. deflation. O an increase in output. A and C
Suppose that the graph below represents the aggregate demand (AD) and aggregate supply (AS) of Guadeloupe. What will happen to Guadeloupe's economy in the long-run, according to the neoclassical view? Potential GDP OO Price Level AS AD Real GDP Guadeloupe's aggregate supply (AS) will shift to the left. Guadeloupe's potential GDP line will shift to the right. Guadeloupe's aggregate supply (AS) will shift to the right. Guadeloupe's aggregate demand (AD) will shift to the left.
During an economic recession caused by a demand disturbance, use classical economics to describe how prices and wages adjust to help markets return to full-employment levels of operation. prices and wages decrease O prices increase, and wages decrease Oprices decrease, and wages increase O prices and wages increase
Explain why the neoclassical economists believethat the government does not need to do much aboutunemployment. Do you agree or disagree? Explain.
The following graph represents an economy. Initially, they produced an aggregate output of $6,000 until they decreased consumption by $500. If price levels did not change, output would have fallen to $5,100. However, prices decreased because of the decrease in consumption, so output only fell to $5,400. Aggregat e Price SRAS 100 97 ADo AD Aggregat 5,10 5.40 6,00 e Outout a. Calculate the simple Keynesian multiplier if the price levels had not changed. Round the answer to the nearest two decimal points. b. Calculate the actual spending multiplier after the prices decreased. Round the answer to the nearest two decimal points.
Which of the following is a TRUE statement in the neoclassical model of AD/AS? Because wages are flexible, they are unaffected by high rates of unemployment. The economy cannot sustain production above its potential GDP in the long run. O A surge in aggregate demand ends up as a rise in output, but does not increase price levels. Lower wages will cause an economy-wide increase in the price of a key input.
Summarize the Neoclassical model: A. The neoclassical model is built on the importance of aggregate demand as a cause of business cycles and a degree of wage and price rigidity, and thus does a sound job of explaining many recessions and why cyclical unemployment rises and falls. B. The neoclassical model emphasizes aggregate supply by focusing on the underlying determinants of output and employment in markets, and thus tends to put more emphasis on economic growth and how labor markets work. C. The neoclassical model is built on the importance of aggregate supply as a cause of business cycles and a degree of wage and price rigidity, but does a poor job of explaining many recessions and why cyclical unemployment rises and falls.
Neoclassical perspective is a- re sisitation of classical econolics, which states that short run dynamica of the economy dissipate very quicly due to inflexible porices. b- revisitation of classical eonomics, which statets that long run fynamics of the economy dissipate slowlllly due to inflexibilyti prices d- re visitation of classical economics which states that short run dynamics of the economy dissipate very quickly due to felexible prices
Which assumption is the Keynesian model based on? O people can afford a high level of government services. O prices and wages are sticky and do not adjust rapidly. O an increase in productivity will cause the aggregate demand curve to shift to the left. O an increase in input prices will cause the aggregate demand curve to shift to the left.
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