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20 Cards in this Set
- Front
- Back
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According to say's law |
Supply creates its own demand |
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The classical economists believe that unemployment could not persist because |
Falling wages would cause businesses to expand employment |
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According to the classical economists, if there was too little spending for goods and services |
A surplus of goods and services would result, and the prices would tend to fall |
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An important conclusion of the Keynesian theory is that |
The economy can be in equilibrium at less than full employment |
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Suppose the economy is operating at potential GDP/full employment. Given a Keynesian aggregate supply curve, an increase in aggregate demand would tend to |
Increase the price level but leave real GDP unchanged |
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Keynesian economists |
Believe that the government should attempt to "manage" aggregate demand |
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Supply side policies are intended to |
Shift the aggregate supply curve to the right |
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Monetarists support a "monetary rule". This means they would like to see |
The money supply increased at a constant annual rate |
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Monetarists believe that discretionary fiscal policy |
Is generally ineffective because of crowding out |
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The theory of rational expectations suggest that |
Individuals consider all available information when they formulate their expectations about the future |
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Supporters to the theory of rational expectations believe that Keynesian monetary and fiscal policies for combating unemployment |
Tend to be ineffective and counterproductive |
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During a period of inflation |
Monetarists would call for steady growth of the money supply |
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According to Keynes, Price and wages, particularly in the downward direction |
Tend to be rigid or sticky or inflexible |
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One advantage of stimulating aggregate supply rather than aggregate demand is that increases in aggregate supply |
Can reduce unemployment and inflation at the same time |
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According to the monetarists, increases in government spending |
Tend to crowd out investment spending |
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Monetarists Believe that discretionary fiscal policy |
Is generally ineffective because of crowding out |
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The aggregate supply curve implied by the classical model of the economy is |
Vertical |
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Keynes believed that if unemployment existed, |
It could be reduced by increasing the level of government spending |
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All of the following schools of economist would be described as non-activist except |
Keynesian economists |
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Which of the following statements about the activist – non-activist debate is accurate |
Keynesians believe that the economy tends to be at less than full employment and as the self-correcting mechanism works too slowly to be relied on, the government should use demand management to fix the economy |
