The new classical school holds that:
a. macroeconomic equilibrium is achieved only through active government intervention.
b. unemployment is only temporary, because the economy tends naturally toward equilibrium.
c. rigid prices and wages prevent the economy from achieving equilibrium.
d. macroeconomic equilibrium cannot occur as long as the aggregate supply curve isvertical
e. rational expectations result in involuntary unemployment and prolonged periods of macroeconomic disequilibrium.
b
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An above-full-employment equilibrium occurs when
A) aggregate demand decreases while neither the short-run nor long-run aggregate supply changes. B) short-run aggregate supply decreases while neither aggregate demand nor long-run aggregate supply changes. C) the equilibrium level of real GDP is greater than potential GDP. D) the equilibrium level of real GDP is less than potential GDP.
A budget line is defined as
A. the number of units of a good that can be purchased over a range of prices. B. the combinations of a set of two goods that can be purchased, given current income and current prices for the goods. C. how a household’s budget is allocated to various members of the family. D. the maximum amount of money that can be spent. E. the combinations of a set of two goods that the household prefers over other combinations.