Exam 10: Classical and Keynesian Macro Analyses

Classical economists wrote from the 1770s to the ________.

In the short run, an increase in the price level induces firms to expand production because

Holding the level of prices fixed implies that a given increase in aggregate demand

Why is wage and price flexibility an important assumption of the classical model?

-Refer to the above figure. Assume that B is the current long-run aggregate supply (LRAS)curve and that E is the current short-run aggregate supply (SRAS)curve. If a new discovery of large oil fields in Florida led to an increase in the nation's productive capacities, then we could expect the LRAS curve and the SRAS curve to

According to Keynes

The gap that exists when equilibrium real GDP is greater than the level of real GDP shown by the position of the long-run aggregate supply curve is

Higher unemployment tends to be associated with

At higher rates of interest

Assume equilibrium real GDP per year is equal to full-employment real GDP. Which of the following will cause a recessionary gap?

If the U.S. dollar becomes weaker in international foreign exchange markets, imported goods become more expensive. One result of this is that

All of the following were classical economists EXCEPT

In the classical model, aggregate demand and aggregate supply will

If the U.S. dollar becomes weaker in international markets, the net effects will include

Regarding unemployment, the classical model implies that

A new discovery of large volumes of previously unknown deposits of natural gas in Pennsylvania would

The Keynesian portion of the short-run aggregate supply (SRAS)curve implies

What is TRUE of the aggregate supply curve in the classical model?

Classical economists suggest that unemployment is a short-lived phenomenon because

-In the above figure, the inflationary gap can correctly be identified as