Why is persistent unemployment a possibility in the Keynesian model but NOT in the classical model?
A) The Keynesian model assumes that people work for motives other than those of earning an income for themselves and supporting a family.
B) The Keynesian model assumes that workers can lose their jobs to foreign competition during economic downturns.
C) The Keynesian model assumes that the level of real GDP is inflexible.
D) The Keynesian model assumes that nominal wages are inflexible downward.
D
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A system of managed floating exchange rates is
A) a system in which governments may attempt to moderate exchange rate movements without keeping exchange rates rigidly fixed. B) a system in which governments use flexible exchange rates. C) a system in which governments are forbidden from attempt to moderate exchange rate movements without keeping exchange rates rigidly fixed. D) a system in which governments need to reach a prior agreement among them before they may attempt to moderate exchange rate movements without keeping exchange rates rigidly fixed. E) a system in which governments use extensive fiscal policy to discourage exchange rate movements.
Suppose a poor economy inches towards the steady state in Solow's exogenous growth model. What happens?
A) Consumption per capita decreases. B) Saving per capita decreases. C) The depreciation rate increases. D) The growth rate of output decreases.