What are the differences between classical theory and what Keynes believed?
What will be an ideal response?
Classical theory asserts that a market economy is inherently stable. Wages and prices are assumed to be flexible, resulting in an automatic adjustment to full-employment equilibrium. Thus classical economists believe in a doctrine of laissez faire nonintervention by the government. Keynes challenged classical theory. He said a market economy is inherently unstable. Disturbances in the economy are likely to be magnified, and government intervention is required to restore full-employment equilibrium.
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The supply curve of a depletable natural resource is usually
A. downward sloping because the resource runs out over time. B. upward sloping because more of the resource can be profitably extracted at higher prices. C. upward sloping because the price of the resource rises at the rate of inflation. D. vertical because the supply of the resource is fixed.
Personal consumption accounted for $12.3 billion in 2015 in the United States.
Answer the following statement true (T) or false (F)
Refer to Figure 4-3. What area represents the deadweight loss at the equilibrium price of P1?
A) C + E B) C + E + H C) G + H D) There is no deadweight loss at the price of P1.
Holding demand constant, an increase in supply leads to
A) lower prices and higher quantity demanded. B) lower prices and lower quantity demanded. C) higher prices and higher quantity demanded. D) higher prices and lower quantity demanded.