An Important Distinction Between the Classical and Keynesian View of the Economy
An important distinction between the classical and Keynesian view of the economy is that
A) Keynes stressed the supply side of an economy while classical economists stressed the demand side of the economy.
B) classical economists argued that output gaps were caused by shifts in the long-run aggregate supply while Keynes' maintained that output gaps were created by shifts in aggregate demand.
C) Keynes stressed the demand side of an economy while classical economists stressed the supply side of the economy.
D) classical economists argued that output gaps were caused by shifts in the long-run aggregate supply while Keynes' maintained that output gaps were created by wage and price rigidities.
Which component of aggregate demand plunged sharply at the start of the Great Depression?
C) government purchases
D) transfer payments
During the Great Depression, investment plummeted because
A) government policies related to investment tax credit changed the incentives for firms to undertake investment spending.
B) the investment boom of the 1920s had left firms with an expanded stock of capital and as the capital stock approached its desired level, firms did not need as much new capital.
C) more and more firms invest abroad rather than in the domestic economy to cut production costs.
D) consumers were not spending enough to justify expenditures on investment.
Which of the following factors contributed to the sharp reduction in aggregate demand during the Great Depression?
I) reduction in wealth
II) reduced consumer confidence
III) tax increases
IV) an expansionary monetary policy that caused inflation
A) I and II only
B) I and IV only
C) I, II, and III only
D) I, II, and IV only