Answer the following statements true (T) or false (F)

1) The idea that the economy will "self-correct" when confronted with changes in aggregate
demand is associated with new classical economics.
2) In the new classical theory, a fully anticipated change in aggregate demand and the price level
will temporarily change real output, but an unanticipated change will not.
3) Mainstream economists say that recessions are unlikely to occur today because prices and
wages are highly flexible downward.
4) Efficiency wage theory says that an above-market wage can reduce labor costs per unit of
output by eliciting greater work effort, lowering supervision costs, and reducing job turnover.

1) T
2) F
3) F
4) T