An Important Distinction Between the Classical and Keynesian View of the Economy

question 100

Multiple Choice

An important distinction between the classical and Keynesian view of the economy is that

• A) Keynes stressed the supply side of an economy while classical economists stressed the demand side of the economy.
• B) classical economists argued that output gaps were caused by shifts in the long-run aggregate supply while Keynes' maintained that output gaps were created by shifts in aggregate demand.
• C) Keynes stressed the demand side of an economy while classical economists stressed the supply side of the economy.
• D) classical economists argued that output gaps were caused by shifts in the long-run aggregate supply while Keynes' maintained that output gaps were created by wage and price rigidities.

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Definitions:

Price Rises

An increase in the cost of goods or services in the market, often due to factors like inflation, increased demand, or higher production costs.

Equilibrium Price

The price at which the quantity demanded of a good equals the quantity supplied.

Quantity Demanded

Represents the total amount of a good or service that consumers are willing and able to purchase at a given price over a specific period of time.

Shortage Occurs

A market condition where the demand for a product exceeds its supply at a given price, leading to a situation where not all consumer demand can be met.