Under classical theory, wages and prices are assumed to be relatively flexible both upward and downward. Hence, the short-run aggregate supply curve returns relatively quickly to a position of long-run equilibrium

In the endogenous growth model with human capital, spending more time on education

A) decreases the growth rate and increases output in the short term. B) decreases the growth rate and decreases output in the short term. C) increases the growth rate and increases output in the short term. D) increases the growth rate and decreases output in the short term.

When an economy is operating below its potential capacity, Keynesian economists argue that

a. taxes should be raised if the government is currently running a budget deficit. b. taxes should be lowered but only if the government is running a budget surplus. c. the government should cut taxes and/or increase expenditures in order to stimulate aggregate demand. d. both a and b are correct. e. all of the above are correct.