An economist from which of the following schools of thought would most likely say - "An increase in government expenditure will only increase inflation, because the aggregate supply curve is vertical"?
A) Neoclassical economics
B) Traditional classical economics
C) New Keynesian economics
D) Keynesian economics
E) Marxist economics

Question

Quizplus · Accepted Answer

This statement reflects the classical economic view that the aggregate supply curve is vertical, meaning that the economy's production capacity is fixed in the short run, and any increase in demand will only lead to an increase in prices (inflation). Neoclassical economics, New Keynesian economics, and Keynesian economics all acknowledge that the aggregate supply curve is upward sloping in the short run, meaning that an increase in demand can lead to an increase in output before reaching full capacity, depending on various economic conditions. Marxist economics is a different school of thought that focuses on the relationship between capital and labor in a capitalist economy and is not directly related to this statement about government expenditure and inflation.

An Economist from Which of the Following Schools of Thought