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Of the following government policies, which would be considered a neoclassical response to an economic recession?...

Of the following government policies, which would be considered a neoclassical response to an economic recession?

an increase in government spending
adjusting the minimum wage higher
dissolving labor unions

If you are explaining the theory of rational expectations to a friend, you would say that the change in an agents’ expectations is ________ and therefore ________ the effectiveness of monetary or fiscal policy.

based on historic information; always improves
immediate; precludes
slow; increases

If a government expands its fiscal policy to raise equilibrium output, what will happen in the long term, according to the neoclassical view of the economy?

It will not work because it will disincentivize production.
It will not work because the flexible prices will eventually choke off any increase in aggregate demand.
It will not work because it will raise the level of unemployment.

In adaptive expectations, agents ________ to make their forecasts of economic conditions.

use both current and past information
ignore current information and consider only the past
ignore the past and consider only current information
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