Exam 10: Classical and Keynesian Macro Analyses

For several years, the U.S. unemployment rate has been below the European unemployment rate. Offer a Keynesian explanation for this.

Suppose the Japanese yen increases in its value relative to the U.S. dollar. In the U.S. economy,

Keynesian economists argue that

Classical economists argued that

Suppose an economy originally in long-run equilibrium experiences a decrease in aggregate demand. According to the classical model

A recessionary gap results when

According to the circular flow of income and output, saving causes

According to classical theory, total employment and real Gross Domestic Product (GDP)are

The horizontal short-run aggregate supply curve

What is TRUE when the credit market is in equilibrium?

Cost-push inflation is

Suppose the Federal Reserve increases the money supply. Which of the following will tend to occur as a result of this policy in a Keynesian model?

Full employment in the classical model is maintained by

Both the long-run and short-run aggregate supply curves will shift when

Economic growth due to labor force expansion or capital investments will result in I. A leftward shift of short-run aggregate supply. II. A rightward shift in long-run aggregate supply.

In the classical model, how do shifts in aggregate demand affect real GDP?

In the simple Keynesian portion of the upward sloping short-run aggregate supply curve

A recessionary gap is the amount by which

If short-run aggregate supply is upward sloping, the assumption is that

In the classical model, the interest rate will adjust to equate