Classical economists think prices and quantities respond to supply and demand and the economy produces its potential output over time. However, Keynesian economists believe pricing and wage rigidities may lower the economy's long-term equilibrium output. Do you agree with Keynes assessment that wage-price rigidity requires government's involvement in the markets? Why? Why not?

The use of money and credit controls to influence macroeconomic activity is:   A) monetary policy   B) fiscal policy   C) supply-side policy   D) classical policy

How can the theory of duality help policymakers regarding supply-side economics? Discuss.

What does a decrease in federal government purchases do to the Neo-Keynesian model used in class? Group of answer choices It shifts long run aggregate supply left. It shifts long run aggregate supply right. It shifts short run aggregate supply left. It shifts aggregate demand left. It shifts short run aggregate supply right. It shifts aggregate demand right.

Which characteristics are associated with the Keynesian theory? Choose all that apply. Group of answer choices Flexible prices Long-run view Long-run aggregate supply primarily affects economic growth (real GDP) Short run view Aggregate demand primarily affects economic growth (real GDP) Inflexible prices

Only Keynesian economics argues for active macroeconomic policy.    True  False

Evaluate the validity of the following claim and justify your answer: “The First Welfare Theorem formally shows that macroeconomic policy is often useless.”

41) Which of the following is a tool for achieving macroeconomic objectives? A) Fiscal policy B) Monetary policy C) Incomes policy D) All of the above 42) Macroeconomics is useful: A) only to governments B) only to business firms seeking to maximize their profits C) only to households seeking employment D) to all economic decision-making units 43) Consider a circular flow model with households, firms, and government. Which of the following is true? A) Households sell labour services and other resources to firms B) Households purchase resources from firms and convert them into goods and services C) The government does not purchase anything from households D) Households receive income from firms but not from the government 44) Payments such as employment insurance and welfare are called: A) employment income B) transfer payments C) compensation income D) business income 45) When households purchase government bonds, they: A) lend to the…

According to the classical economists, the supply curve is vertical at the level of potential GDP. What happens to the level of real output and price no matter where the demand curve is drawn?

The graph above refers to a significant increase in individual income taxes, taking them to their highest level in 50 years. Which of the following is likely to result? a) macroeconomic supply will decrease in the short run b) the economy will experience lower economic growth c) inflationary pressures will be mild d) cyclical unemployment will decrease