The Reason for Different Effects of an Anticipated Fiscal Policy

question 63

Multiple Choice

The reason for different effects of an anticipated fiscal policy on the full-employment output in the Keynesian and Classical models is

• A)the Keynesian model assumes perfect insight,but the Classical model assumes rational expectations.
• B)the Keynesian model assumes rational expectations,but the Classical model assumes perfect insight.
• C)the Keynesian model assumes perfect insight,but the Classical model assumes rational
• D)contrary to the Classical model,the Keynesian model assumes that policy has no wealth effect.

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Definitions:

Resources Scarcity

The economic condition of limited natural resources available to meet the unlimited wants and needs of people.

Downward Slope

A graphical representation indicating a decrease or decline in a variable as another variable increases, often seen in demand curves.

Production Possibility Frontier

An illustration representing the highest potential outputs for multiple goods using specific resources.

Economy Grows

The increase in the production of goods and services over a period, indicating economic health.