Chapter 13: Neoclassical Perspective Flashcards Preview

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Flashcards in Chapter 13: Neoclassical Perspective Deck (10)
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1
Q

Does Keynesian Economics focus on the long term or short term?

A

Short Term

2
Q

Does Neoclassical Economics focus on the long term or short term?

A

Long Term

3
Q

2 Building Blocks of Neoclassical Economics

A
  1. Size of economy determined by potential GDP

2. Wages and prices adjust in a flexible manner, so economy adjusts back to potential GDP level of output

4
Q

Potential GDP

A

Level of output that can be achieved when all resources (land, labor, capital, and entrepreneurial ability) are fully employed

5
Q

Full Employment

A

Refers to no cyclical unemployment. There will be structural and frictional unemployment.

6
Q

Does neoclassical economics view prices and wages as sticky or flexible?

A

Flexible

7
Q

Rational Expectations

A

People form the most accurate possible expectations about the future as they can, using all information available to them. Economic adjustments may happen quickly. Looks to the future.

8
Q

Adaptive Expectations

A

People look at past experience and gradually adapt beliefs and behavior as circumstances change. Economic adjustments happen slowly. Looks to the past.

9
Q

What does the Neoclassical long-run aggregate supply curve show for the Phillips Curve?

A

Vertical

No long run tradeoff between inflation and unemployment

10
Q

What do neoclassical economists think government policy should focus on?

A

Long-run productivity growth through investment in human capital, physical capital, and technology. Government should focus on promoting these factors.