If the Economy Diverges from Its Full-Employment Output, New Classical

question 37

Multiple Choice

If the economy diverges from its full-employment output, new classical economics would suggest that

• A) a change in the velocity of money would be all that is needed to return it to its full- employment output.
• B) an improvement in insider-outsider relationships is all that is needed to return it to its full- employment output.
• C) an efficiency wage in the economy would return it to its full-employment output.
• D) internal mechanisms within the economy would automatically return it to its full- employment output.

---

Definitions:

Comparative Advantage

Comparative advantage is an economic principle that describes how a country can gain by producing goods and services for which it has a lower opportunity cost than other countries.

Nigerian Worker

An individual employed in Nigeria, notable for discussing work issues relevant to the social, economic, and environmental context of Nigeria.

Japanese Trade Surplus

A situation where Japan exports more goods and services than it imports, leading to a positive balance of trade.

Trade Imbalance

A situation where a country's imports and exports do not balance, resulting in a surplus or deficit.