Which of the Following Is a Basic Difference Between the Classical

question 313

Multiple Choice

Which of the following is a basic difference between the classical model and the Keynesian model in which the Keynesian short-run aggregate supply curve exists?

• A) The classical model assumes that the long run aggregate supply curve is vertical, while the Keynesian model assumes the long run aggregate supply curve is horizontal.
• B) The classical model assumes that the position of the long run aggregate supply curve is determined by full employment, while the Keynesian model assumes that the long run aggregate supply curve will be to the left of full employment.
• C) The classical model assumes that the level of real GDP is supply determined, while the Keynesian model assumes that it is demand determined.
• D) The classical model uses real GDP, while the Keynesian model uses nominal GDP.

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Definitions:

Investment Account

A financial account held at a financial institution that holds investments such as stocks, bonds, mutual funds, and other assets for the investor.

Compounding Effect

The method by which an investment's worth grows over time as the returns it generates, including both capital gains and interest, themselves accumulate interest.

Present Value

Present value is the today's worth of an anticipated future amount of money or cash flows, factoring in a specified rate of return.

Discount

A reduction applied to the price of goods, services, or securities.