1. Keynes argued that an economy could be in equilibrium with a substantial amount of involuntary unemployment, but other economists took the stand that an equilibrium in which an important market does not clear is a contradiction in terms. Explain the notions of equilibrium involved, Keynes's justi?cation for his position, and his opponents' justi?cation for theirs.
2. Distinguish between Keynesian unemployment caused by an aggregate demand de?- ciency and classical unemployment due to real wages being above the full-employment level. What can monetary policy do to reduce each of these?