Why is persistent unemployment a possibility in the Keynesian model but NOT in the classical model?
A. The Keynesian model assumes that nominal wages are inflexible downward.
B. The Keynesian model assumes that people work for motives other than those of earning an income for themselves and supporting a family.
C. The Keynesian model assumes that workers can lose their jobs to foreign competition during economic downturns.
D. The Keynesian model assumes that the level of real GDP is inflexible.
Answer: A
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A) less of that good and more of its substitutes. B) more of that good and less of its substitutes. C) less of that good and less of its substitutes. D) more of that good and more of its substitutes.
Everything else held constant, a decrease in net taxes ________ aggregate ________
A) increases; demand B) decreases; demand C) decreases; supply D) increases; supply
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A) may have stimulative effects on economic activity in the short run B) contributes to lower interest rates in the long run C) is likely to increase future productive capacity in the long run D) all of the above E) none of the above
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