Do Keynesians and classicals agree on the effectiveness and desirability of macroeconomic stabilization? Briefly explain
What will be an ideal response?
No, Keynesians and classical economists disagree on the effectiveness and desirability of macroeconomic stabilization. In the classical model, business cycles fluctuations are the optimal response of the economy to various shocks that hit the economy; thus they should not be offset by macroeconomic policy. In the Keynesian model, large and persistent business cycle fluctuations are usually caused by aggregate demand shocks in the presence of price stickiness. Macroeconomic stabilization policies can effectively reduce business cycle fluctuations, so these policies are desirable in that they can help the economy to maintain output at the full-employment level.
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The condition, MRSC,C' = 1 + r, describes the representative consumer's
A) investment decision. B) consumption - savings decision. C) current period work - leisure decision. D) future period work - leisure decision.
The misperception effect explanation for an upward-sloping short-run aggregate supply curve is based on: a. falling profit margins as the price level rises
b. rising costs of production as the price level rises. c. fixed wage labor contracts. d. people mistaking changes in aggregate demand for changes in the demand for their goods relative to other goods and services.
Commodity egalitarianism suggests that some goods be available to everyone.
A. True B. False C. Uncertain
Higher interest rates can cause the ________ curve for new cars to ________.
A. demand; shift to the right. B. supply; shift to the right. C. demand; shift to the left. D. supply; shift to the left.