Answered: 100 Price Level 90 80 70 60 50 40 30 20…

Principles of Economics (MindTap Course List)

8th Edition

ISBN:9781305585126

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter34: The Influence Of Monetary And Fiscal Policy On Aggregate Demand

Section: Chapter Questions

Problem 4CQQ

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Pick 1 answer. 4. Summarize the Neoclassical model: A. The neoclassical model is built on the importance of aggregate demand as a cause of business cycles and a degree of wage and price rigidity, and thus does a sound job of explaining many recessions and why cyclical unemplovment rises and falls. B. The neoclassical model emphasizes aggregate supply by focusing on the underlying determinants of output and employment in markets, and thus tends to put more emphasis on economic growth and how labor markets work c. The neoclassical model emphasizes aggregate demand by focusing on the underlying determinants of output and employment in markets, but tends to but less emphasis on economic growth and how labor markets work. 9.

100
Price Level
90
80
70
60
50
40
30
20
10
Long-run Aggregate Supply
0
0 1 2 3
Aggregate demand
4 5
Real GDP in millions
6 7 8 9 10
in
The government of Mogunsia plans to increase government expenditures in order to fund defense. Use the long run classical model to show
what will happen to real GDP and the price level on the graph above.
O A. Real GDP is unchanged, price level is unchanged
O B. Real GDP increases, price level increases
O C. Real GDP is unchanged, price level increases
O D. Real GDP increases, price level is unchanged
hp
1₂
72°F Mostly cloudy

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