Discuss the major differences between classical and Keynesian economists. Be sure to explain how they differ with regard to how quickly equilibrium is restored in the economy as well as what role they see for government action in restoring equilibrium.
What will be an ideal response?
Classical and Keynesian economists differ most with regard to how quickly they see wages and prices adjusting to restore equilibrium in the economy. Classical economists think that when the economy is out of equilibrium, wages and prices adjust quickly to restore equilibrium. As a result, there shouldn't be long periods of abnormally high unemployment. The quick return to equilibrium means there is no reason for government action. Keynesians, on the other hand, think wages and prices are slow to adjust. As a result, the economy may be out of equilibrium for some time, perhaps with high unemployment. To restore equilibrium quickly may necessitate some government action, such as increasing the government's demand for goods and services.
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The total welfare associated with a market that includes a government sales tax equals
A) consumer surplus plus producer surplus. B) consumer surplus plus producer surplus minus government tax revenue. C) consumer surplus plus producer surplus plus government tax revenue. D) the government tax revenue.
A school bookstore tried to engage in price discrimination by selling novels to students and faculty for different prices. Its strategy was to increase prices to faculty and decrease prices to students. What is the most likely reason that this strategy failed?
A. Novels are sold in a competitive market. B. There was nothing to prevent students from purchasing novels and reselling them to faculty. C. Everyone had inelastic demand for novels. D. There was no easy way to distinguish the students from the faculty.
A table showing how much lemonade consumers are willing to buy at different prices would be best described as a
A. consumption table. B. supply schedule. C. demand schedule. D. equilibrium table.
According to the text, which of the following is a form of water pollution?
A. Smog. B. Thermal pollution. C. Slaughter waste. D. The greenhouse effect.