Classical economists of the 1930's did not believe that:
A. the market, left to its own devices, is self-adjusting.
B. wages and prices will adjust to eliminate unemployment.
C. in the short-run the economy might experience some problems.
D. unions kept incomes high enough to avoid an excess supply of output.
The __________________ plays an important role in determining output in the _______________.
A. potential output curve (LAS); short run
B. aggregate supply curve (SAS); long run
C. potential output curve (LAS); long run
D. none of these choices are correct responses.
Suppose the economy is initially in a recessionary gap and consumer and business expectations become less optimistic due to the War on Terrorism. In the long run, assuming that there is no policy intervention by Government, it follows that:
A. real output and the price level will be lower.
B. only real output will be lower.
C. only the price level will be lower.
D. real output will be higher and the price level will be lower.
True or false? Assuming that we isolate on just the relationship between productivity and wages as a shift factor in the SAS Curve, if productivity and wages both increase by 3%, then the SAS Curve will not shift.