Chapter 26 - The Neoclassical Perspective - Study Guide

Chapter 26 - The Neoclassical Perspective - Study Guide 1. What is the neoclassical economic view of the economy? 2. What is the neoclassical view of the long-run economy with regards to GDP and unemployment? 3. What are the building blocks of the neoclassical perspective? 4. What government policies would be supported by neoclassical macroeconomic assumptions? 5. What would Keynesian economists say about creating increases in Aggregate Demand to reduce unemployment? 6. From a neoclassical point of view, should government focus on cyclical unemployment? 7. From a neoclassical point of view, should government focus on long term expansion of the economy or on short term unemployment. 8. From a neoclassical point of view, do wages and prices adjust over time? 9. From a Keynesian point of view, are wages sticky? 10. From a neoclassical point of view, what would the Aggregate Supply curve look like? 11. In the neoclassical AS/AD model, how is economic growth in potential GDP shown? 12. If an economy experiences a decrease in aggregate demand due to a decline in consumer confidence and output falls below potential GDP, how is employment affected? 13. In the short run Keynesian model, how is aggregate demand affected if there is a rise in consumer confidence? 14. In the neoclassical view, what affect on unemployment and output do changes in aggregrate demand have? 15. What are rational expectations? 16. What does "self-correcting tendency" have to do with potential GDP? 17. If the neoclassic view, what would be most important to encourage potential GDP to return its potential? 18. What does the Phillips Curve graphically show? 19. In the neoclassical model, what will the level of cyclical unemployment be when an economy is producing at potential GDP? 20. What is the purpose of investing in human capital, according to the neoclassical model? 21. In the Keynesian model, what role may inflation play during a recession? 22. If the Aggregate curve is vertical, as in the Neoclassical model, how is Aggregate Demand affected? 23. Why do neoclassic put more emphasis on long term growth than on short term recessions?
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