Exam 10: Classical and Keynesian Macro Analyses

Suppose Paris thinks a 5 percent increase in her hourly wage as an incentive to work more hours while the price level also increases by 5 percent. Paris is said to be suffering from

The classical economists assumed that

An upward sloping short-run aggregate supply curve suggests that

Which of the following statements about the classical model of the economy is FALSE?

According to Keynes, the classical model could not explain

"The level of employment in an economy determines its real GDP, other things held constant." Do you agree or disagree? Why? What assumptions are necessary for your conclusion based on the classical model?

Along a short-run aggregate supply curve, which of the following is (are)held constant?

According to classical economists, a decrease in the rate of interest will

Saving is a leakage from the circular flow. Why didn't the classical economists think saving might cause consumption expenditures to fall short of total output?

-Refer to the above figure. Assume that B is the current long-run aggregate supply (LRAS)curve and E is the current short-run aggregate supply (SRAS)curve. If a 90-day embargo of oil from the Middle East to the United States were announced, and if after that 90-day period oil prices were expected to return to normal pre-embargo prices, then you would expect

Long-run unemployment in the classical model is considered to be impossible because

The short-run aggregate supply curve is a relationship between

In the short run, if aggregate demand shifts to the left while the position of the short-run aggregate supply curve does NOT change, then

In an economic downturn, sticky wages and prices reduce the economy's speed of adjustment because

Saving represents

According to classical theory, a shift in aggregate demand will affect

In the classical model, desired saving

In the classical model, an increase in the unemployment rate

Suppose we observe the price level increasing and real GDP decreasing. An explanation for this is that

In the classical model, a shift to the right in aggregate demand would result in