Oh no! 23. According to Neo Classical economists, a way to stimulate economic growth of the nation is charging low taxes. C) the labor supply does not change in the economy. Classical economic theory was developed shortly after the birth of western capitalism. According to the classical economists, unemployment was a temporary deviation from equilibrium, and certain forces in the economy would return it to full employment. See the answer. - Government intervention can only be a detriment to the economy. A. Due to these transactions, Mike purchased a 1968 Chevy Corvette in 2006 for $30,000 and a year later he sold it for $36,000. c. saving may be less than investment. Rapid increases in the price level during periods of recession or high unemployment are known as, Stagflation occurs when the economy's inflation rate is high and, Related to the Economics in Practice on p. 97 [409]: F. Scott Fitzgerald's The Great Gatsby is set in the "Roaring '20s". According to the Classical economists, the economy A) requires fine-tuning to reach full employment. In which basic market would DVDs be traded? A year later the stock is valued at $18,000. Which of the following is an assumption used by Classical economists? According to classical economic theory there is no government intervention and the people of the economy will allocate scare resources in the most efficient manner to meet the needs of individuals and businesses. The thinking goes something like this: if competition is allowed to work, the economy will automatically gravitate towards full employment or what economists call 'potential output.' b. both velocity and real output are variable. In a business cycle, a peak represents the end of ________ and a trough represents the end of ________. According to classical macroeconomic theory, changes in the money supply affect a. real GDP and the price level. the classical economists believed _____ both wages and prices were downwardly flexible. It refers to the dominant school of thought for economics in the 18th and 19th centuries. Which of the following typically rises during a recession? c. changes in the money supply cause changes in velocity. B.simultaneously generates the income. Smith claimed that when two parties freely agree to exchange things of value, total wealth increases. The new classical macroeconomics is a school of economic thought that originated in the early 1970s in the work of economists centered at the Universities of Chicago and Minnesotaparticularly, Robert Lucas (recipient of the Nobel Prize in 1995), Thomas Sargent, Neil Wallace, and Edward Prescott (corecipient of the Nobel Prize in 2004). School United States Air Force Academy; Course Title BUSINESS 707; Uploaded By penelopegerhard; Pages 70; Ratings 100% (11) 11 out of 11 people found this document helpful. Keynesian view on classical unemployment. If the labor force is 50 million and 48 million are employed then the unemployment rate is: If 20 million workers are unemployed and 180 million workers are employed, then the unemployment rate is, The period in the business cycle from a trough to peak is called a(n), If output is rising and unemployment is falling, the economy MUST be in a(n), The period in the business cycle from a peak to a trough is a(n). Which of the following is a CORRECT statement? This decade in U.S. history was characterized by. Classical economists stress the importance of this type of unemployment. According to Classical economists, excessive unemployment does not persist in the economy because A) wages will always adjust to ensure equilibrium in the labor market. Previous question Next question Transcribed Image Text from this Question. Which of the following would explain wage rigidities? According to the Classical economists, the economy. The portion of a corporation's profits that a firm pays out each period to its shareholders is a, To get the economy out of a slump, Keynes believed that the government should, To bring the economy out of an inflationary period, Keynes argued that the government should. Promissory notes issued by the federal government when it borrows money are known as, A promissory note issued by a corporation when it borrows money is a. As Smith saw it, the … Which of the following adjust to bring aggregate supply and demand into balance? Which of the following is NOT a topic studied in Macroeconomics? It doesn't need the king or a board of trade to decide what prices should be or what products are for sale. According to Keynesian economists, the government should increase employment by. Because prices and wages are inflexible and do not fall immediately, the decreased spending causes a drop in production and layoffs of workers. Classical economics or classical political economy is a school of thought in economics that flourished, primarily in Britain, in the late 18th and early-to-mid 19th century. Classical economists assume that the most important factor in a product's price is its cost of production. Macroeconomic policies became more influenced by Keynes' theories starting with, According to Classical models, the level of employment is determined primarily by, According to Keynes, the level of employment is determined by, The concept of "market clearing" is adopted and defended by, Suppose the economy suffers a high rate of unemployment. view the full answer. Since 1970, the U.S. economy has experienced four A) periods of high inflation. 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