According to classical theory, if the aggregate demand curve decreased and the economy experienced unemployment, then:
a. the economy would remain in this condition indefinitely.
b. the government must increase spending to restore full employment.
c. prices and wages would fall quickly to restore full employment.
d. the supply of money would increase until the economy returned to full employment.
c
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A decrease in government transfer payments
A) increases aggregate demand. B) increases the aggregate quantity demanded. C) decreases the aggregate quantity demanded. D) decreases aggregate demand.
Resources are efficiently utilized when production is such that marginal social benefit
A) is equal to marginal social cost. B) exceeds marginal social cost by as much as possible. C) is less than marginal social cost. D) None of the above because efficiency has to do with property rights and has nothing to do with marginal social benefit or marginal social cost.
Keynesians disagree with the new classical model because
a. people are often irrational. b. wages are often negotiated through contracts, not auctions. c. people do not form expectations. d. wages are set to clear auction markets in both the short run and long run. e. all of the above
Many economists consider perfect competition to be the most desirable market structure because they believe it generates the
a. highest average cost b. lowest prices and output c. greatest economic profit d. lowest prices and greatest output e. greatest normal profit