Question

6. Consider the following statements about the macroeconomy. For each, indicate whether the statement best distinguishes the strict Keynesian view, strict classical view, or neither of these views a. All prices are completely flexible. b. The primary focus is on aggregate supply. c. Spending is the key determinant of output. d. Capital is the key source of economic growth. e. Saving can be detrimental to the economy. f. The macroeconomy generally takes care of itself. g. Every dollar borrowed requires a dollar saved. h. The macroeconomy is inherently unstable. i. Full employment is at the natural rate of unemployment. j. Some prices don't adjust downward.

Answer 1

(a) Strict Classical

The strict classical view holds that all wages and prices are fully flexible.

(b) Strict Classical

The strict classical view puts more emphasis on aggregate supply.

(c) Strict Keynesian

Keynesians hold that spending is the key determinant of growth.

(d) Strict Classical

Strict Classical view holds that capital is the key determinant of growth.

(e) Strict Keynesian

Strict Keynesian view emphasizes on spending as driver of growth, so saving is harmful for growth.

NOTE: As HOMEWORKLIB Answering Policy, 1st 5 parts have been answered.