Do the real effects of aggregate demand shocks differ in the short run and long run in the Keynesian sticky-price model from the effects of these shocks in the classical model of perfectly flexible prices? Briefly explain
What will be an ideal response?
In the Keynesian model, aggregate demand shocks affect real output, employment, and unemployment in the short run. There is no short-run adjustment period in the classical model, since economic shocks cause prices to adjust immediately to their long-run, general equilibrium values. Keynesian and classical economists agree that aggregate demand shocks have no real output or employment effects in the long run.
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If advertising decreases the elasticity of demand for specific brand names of hard liquor, we would expect firms to be able to charge a larger markup over marginal cost
a. True b. False Indicate whether the statement is true or false
The information-aggregation problem faced by the top layers of government can make it hard for the high-level officials to:
A. Discern the prices of specific goods and services in the economy B. Comprehensively assess the marginal costs and benefits of specific programs C. Monitor the incomes of individual firms and households D. Estimate the total amount of spending incurred by the government