Principles of Economics 2e
2nd Edition
ISBN: 9781947172364
Author: Steven A. Greenlaw; David Shapiro
Publisher: OpenStax
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Textbook Question
Chapter 26, Problem 15RQ
When the economy is experiencing a recession, why would a neoclassical economist be unlikely to argue for aggressive policy to stimulate aggregate demand and return the economy to full employment? Explain your answer.
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Does neoclassical economics focus on the long term or the short term? Explain your answer.
According to a neoclassical perspective, in the long run, a surge in aggregate demand will most likely result in
A) A rise in the level of output.
B) An increase in the aggregate price level.
C) A decline in the level of output
D) Downward pressure on the price level.
Why would an economist choose either the neoclassical perspective or the Keynesian perspective, but not both?
Chapter 26 Solutions
Principles of Economics 2e
Ch. 26 - Do rational expectations tend to look back at past...Ch. 26 - Legislation proposes that the government should...Ch. 26 - Would it make sense to argue that rational...Ch. 26 - Summarize the Keynesian and Neoclassical models.Ch. 26 - Does neoclassical economics focus on the long term...Ch. 26 - Does neoclassical economics view prices and wages...Ch. 26 - What shape is the long-nm aggregate supply curve?...Ch. 26 - What is the difference between rational...Ch. 26 - A neoclassical economist and a Keynesian economist...Ch. 26 - Do neoclassical economists tend to focus more on...
Ch. 26 - Do neoclassical economists tend to focus more on...Ch. 26 - Do neoclassical economists see a value in...Ch. 26 - If aggregate supply is vertical, what role does...Ch. 26 - What is the shape of the neoclassical long-run...Ch. 26 - When the economy is experiencing a recession, why...Ch. 26 - If the economy is suffering through a rampant...Ch. 26 - If most people have rational expectations, how...Ch. 26 - Explain why the neoclassical economists believe...Ch. 26 - Economists from all theoretical persuasions...Ch. 26 - Is it a logical contradiction to be a neoclassical...Ch. 26 - Use Table 26.3 to answer the following questions....
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- Do neoclassical economists tend to focus more on long term economic growth or on recessions? Explain briefly.arrow_forwardFrom a neoclassical view, which of the following is less important? fighting unemployment encouraging long-term growth encouraging more productivity per worker level of potential GDParrow_forwardIf a neoclassical model shows increasing wages growing faster than productivity in the economy over the long run, what else will likely occur? inflationary increase in price level substantial short-term off-setting decrease in output change in government policy to decrease in aggregate demand short-run decrease in cyclical unemploymentarrow_forward
- Why would neoclassical economists think that the government doesn't need to take many steps to combat unemployment? Whether you concur or disagree Explain.arrow_forwardIf the production conditions in the United States and Japan were to become essentially the same, would the neoclassical model suggest that trade between the two countries would cease? Why or why not? Illustrate your answer with a graph.arrow_forwardIn the neoclassical Supply and Demand model, what is meant by shortage? Group of answer choices Making a bet that the value of a stock will go down. At the existing price, the quantity demanded exceeds the quantity supplied. At the existing price, quantity supplied exceeds the quantity demanded. A decrease in quantity demanded.arrow_forward
- From a neoclassical view, which of the following is least important? Select one: a. improving the corporate portfolio b. stimulating potential GDP c. increasing aggregate demand to fight unemployment d. encouraging long-term growtharrow_forwardA neoclassical economist and a Keynesian economist are studying the economy of Vineland. It appears that Vineland is beginning to experience a mild recession with a decrease in aggregate demand. Which of these two economists would likely advocate that the government of Vineland take active measures to reverse this decline in aggregate demand? Why?arrow_forwardAggregate Supply: Explain whether the economy is currently operating in the Keynesian, intermediate or neoclassical portion of the economy's aggregate curve. Also, point out a time when the economy may have been operating at another portion of the aggregate supply curve.arrow_forward
- Legislation proposes that the government should use macroeconomic policy to achieve an unemployment rate of zero percent, by increasing aggregate demand for as much and as long as necessary to accomplish this goal. From a neoclassical perspective, how will this policy affect output and the price level in the short run and in the long run? Sketch an aggregate demand/aggregate supply diagram to illustrate your answer.arrow_forwardWhich of the following schools of economic thought modelled the economy as a physical system that was quickly brought back to equilibrium by the actions of rational economic agents? Keynesians O The Catastrophists The Neoclassicals O The Austriansarrow_forwardEconomics What does it mean to “vote with your dollar,” and how does this relate to Walras’s theory of General Equilibrium? Explain the relevant neoclassical assumptions for his model to work, and then give and support your opinion to the following question: are markets a good way to allocate resources?arrow_forward
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