Question

According to neoclassical theory, changes in GDP, or the vertical AS curve, will be caused by

potential output changes.

cyclical unemployment.

aggregate demand changes.

The owner of a national construction company has been watching current economic changes. They have gathered historical data from their company’s business experiences through up and down markets and have decided on a plan to follow as demand changes over the next year, three years and five year plan, with alternative options based on past data. Why is the owner making these type of decisions for the long-run?

The owner is using aggregate expectation reasoning to to change important aspects of the company to be ready for short-term future demands.

The owner is using adaptive expectation reasoning to change important aspects of the company to be ready for future demands as the long-term economy shifts.

The owner is using rational expectation reasoning to change important aspects of the company to be ready for future demands of a long-term economic shift.

Which of the following scenarios would most likely be viewed from a neoclassical perspective as an undermining element of the long-run productivity growth in an economy?

stimulus spending by the government

business capital investment tax cuts

unemployment that is cyclical

Which of the following factors are excluded from shifting the aggregate demand curve?

a cut in personal income tax rates

high consumer confidence

increased defense spending

an increase in the price level

Answer 1