Do the real effects of aggregate demand shocks differ in the short run and long run in the Keynesian sticky-price model from the effects of these shocks in the classical model of perfectly flexible prices? Briefly explain
What will be an ideal response?
In the Keynesian model, aggregate demand shocks affect real output, employment, and unemployment in the short run. There is no short-run adjustment period in the classical model, since economic shocks cause prices to adjust immediately to their long-run, general equilibrium values. Keynesian and classical economists agree that aggregate demand shocks have no real output or employment effects in the long run.
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In the economy of Confoundia, 500 people have jobs, 1000 people are not working but are searching for work, and 2000 people don't work and don't seek work. The unemployment rate is
A) 25 percent. B) 33 percent. C) 40 percent. D) 50 percent. E) 66 percent.
The study of how people make decisions in situations where attaining their goals depends on their interactions with others is called
A) game theory. B) dominant strategy equilibrium. C) the prisoner's dilemma. D) Nash equilibrium.
A professor spends 10 hours per day giving lectures and writing papers. For the professor, a graph that shows his various possible mixes of output (lectures given per day and papers written per day) is called his
a. line of tastes. b. trade-off curve. c. production possibilities frontier. d. consumption possibilities frontier.
The desire to redistribute income more fairly was one of the major motivations for ______.
a. the Russian Revolution b. the American Revolution c. World War I d. World War II