Chapter 11 Classic and Keynesian Economic Anaylses
In the Keynesian model in which SRAS exists, what determines real GDP?
Aggregate demand
What did Keynes argue about capitalism?
It did not always lead to full employment
Why is the SRAS curve positively sloped?
Some price adjustments take place
What is the equilibrating force in the credit market according to classical model?
The interest rate
In the classical view, if desired saving exceeds desired investment, then...?
The interest rate would decline
What is the LRAS curve in the classical model?
The level of real GDP corresponding to the natural rate of unemployment
What does the SRAS represent the relationship between?
The price level and real GDP without full adjustment or full information
According to Keynes, wages are inflexible because..?
Unions and long term contracts
What is demand-pull inflation?
When aggregate demand shifts to the right, but Aggregate supply stays the same