Suppose labor demand decreases because of negative supply shock. How would you expect such a change to affect output, employment, and the real wage in the classical model?
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- Suppose that the public’s taste changes in such a way that leisure comes to be more desirable than commodities. How would you expect such a change to affect output, employment, and the real wage in the classical model?Using the labor market, production function. and AS/AD graphs of the classical model, show the effects of an increase in the labor supply. What are the effects on real wages, the quantity of labor, real GDP, and prices? Explain and show graphically.In the “Classical Theory of Inflation”, what determines the price level and the value of money? Explain using a supply and demand plot.
- Why do economists think the classical dichotomy holds in the long run?Which of the following is a belief of classical theory? A. Long-run full employment B. Inflexible wages C. Inflexible prices D. All of the above answers are correctExplain how the interest rate works in the classical system to stabilize aggregate demand in the face of autonomous changes in components of aggregate demand such as investment or government spending.
- Explain and show in detail whether the following sentence is correct or incorrect: "For Keynes, the rigidity of the real wage was the fundamental factor to explain the possibility of a capitalist economy operating with a high rate of unemployment".From 1990 to 1995, the U.S. economy was in a recessionary gap. According to the classical economists, which of the following should have occurred? Group of answer choices interest rates should have fallen which would increase consumer and investment spending prices should have fallen which would increase consumer spending all of the above should have occurred wages should have fallen which would cause more workers to be hiredOn what basis would you reach the conclusion that classical economics is fundamentally incompatible with Keynesian economics regarding the impact of aggregate demand policies on employment, output and interest rate? Explain with the aid of appropriate diagrams.
- In this question, we assume Canada is a closed economy and is in its long-run equilibrium. TransCanada announced that they will not proceed with the East Energy pipeline in October 2017. According to the long-run classical model, what happens to the equilibrium levels of output, real interest rate, and investment in Canada after TransCanada made this announcement? What happens to the real wage in Canada? Explain your answer with the aid of TWOdiagrams - one for the loanable funds market and one for the labour market.According to the Keynesian ideas on Aggregate Demand, a macroeconomist would most likely expect business expenditure to increase when ... Group of answer choices a. Interest rates are low and expected returns are low b. Interest rates are high and expected returns are high c. Interest rates are low and expected returns are high d. Interest rates are high and expected returns are lowThe classical model uses the assumption that: OPTIONS: all wages and prices are flexible. monopoly is widespread in the economy. interest rates are not flexible. economic markets are fragile and have no tendency to move towards an equilibrium.
