ECON 131 HW 13 – Flashcards
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The neoclassical perspective on macroeconomics emphasizes that in the long run, the economy seems to rebound back to its _____________ and its __________________.
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potential GDP; natural rate of unemployment
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Which of the following is a building block of neoclassical economics?
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wages and prices will adjust in a flexible manner
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Which of the following represents a Keynesian point of view of macroeconomics?
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creating increases in aggregate demand to reduce unemployment
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From a neoclassical viewpoint, government should focus less on:
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cyclical unemployment.
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The Keynesian view of economics assumes that:
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wages are sticky.
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A vertical AS curve means that the level of aggregate supply (or potential GDP) will determine the real GDP of the economy, regardless of the level of:
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aggregate demand.
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In the neoclassic model, economic growth over time shifts potential GDP and the ______________ gradually to the right.
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vertical AS curve
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Over the long run, a surge in aggregate demand from a neoclassical perspective will most likely result in:
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an increase in price level.
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If an economy experiences a decrease in aggregate demand due to a decline in consumer confidence and output falls below potential GDP, which of the following is likely to occur?
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a rise in unemployment
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The theory of ______________ holds that people will use all information available to them to form the most accurate possible expectations about the future.
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rational expectations
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In the neoclassical view, the economy has a _______ to move back to potential GDP.
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self-correcting tendency
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If the neoclassical argument that the economy always moves back to potential GDP is accepted, then which of the following will be more important?
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encouraging long-term growth
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Suppose that productivity growth in an economy over a two-year period has fallen to less than 2% per year, causing a severe recession. From the neoclassical view, which of the following will be more important in these circumstances?
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the growth rate of long-term productivity
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Using a neoclassical model, what will the level of cyclical unemployment be when an economy is producing at potential GDP?
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zero
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Which of the following is most strongly supported by the Keynesian perspective of macroeconomics?
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inflation is a price that might have to be paid to achieve lower unemployment
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Referring to a Keynesian Phillips curve, a reduction in inflation is likely to cause:
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at least a slight increase in unemployment.
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Why do neoclassical economists tend to put relatively more emphasis on long-term growth than on fighting recession?
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standard of living is ultimately determined by long-term growth
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Referring to the diagram above, which of the following is a true statement?
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Higher cost levels of increased output will force an increase in price for the product.
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A vertical aggregate supply curve, where the quantity of output is consistent with many different price levels, also implies:
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a vertical Phillips curve.
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If aggregate supply is vertical, then aggregate demand does not affect:
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the quantity of output.
