It began in 1776 and ended around 1870 with the beginning of neoclassical economics. Consider these four graphs. Classicalists. How many years passed before the United States reached its lowest real GDP level during the Great Depression? The Great Depression actually consisted of two separate recessions. Which of the following policy statements would a classical economist tend to support? In the 1970s, however, new classical economists such as Robert Lucas, […] The government should allow the economy to adjust to changes in aggregate demand on its own, without interference. When considering the basic operations of the macroeconomy, Keynesian economists argue that: the decline in real GDP was much larger and lasted longer. Which of the following statements is consistent with what happened during the Great Depression? This spike in unemployment was caused by the large decrease in aggregate demand. As Marx wrote, “By classical Political Economy, I understand that economy which, since the time of W. Petty, has investigated the real relations of production in bourgeois society” (K. Marx and F. Engels, Soch., 2nd ed., vol. Which of the following statements is consistent with what happened during the Great Recession? This would have been caused by: Which of the following led to the Great Depression? During the Great Recession, there was a financial crisis, a stock market crash, and a collapse in housing prices, all of which: contributed to a very long and deep recession. If you asked a classical economist which economic time frame she prioritized, how might she respond? Keynesian economists believe that prices are sticky and do not adjust quickly, from which they concluded that: government intervention is sometimes necessary to promote full employment. Graph ____ depicts the conditions of the Great Recession, and graph _____ depicts the conditions of the Great Depression. Aggregate demand and long-run aggregate supply decreased, causing unemployment to rise to 10%. What is the difference between unemployment rates during the Great Depression and the Great Recession at their peaks, One of the reasons why the Great Depression was so severe is that, Which of the following economic statements would a Keynesian economist tend to support, Which of the following led to the Great Depression, After year 2 of the Great Recession, the United States began to experience _______ in real GDP and _______ in the unemployment rate. When 9,000 banks failed during the Great Depression, it caused aggregate demand to decrease because: the government didn't help the banks, causing the money supply to decrease. The "first wave" of the Great Depression first began in _________ and initially lasted for _________. (Image: economicsonline.co.uk) Keynesian economics vs. neo-classical economics. the U.S. government decreased the supply of money. Keynesian economists assume that there are frictions in markets. Advocate roles for government in inducing long-term objectives. a decrease in consumer confidence and a decrease in financial market stability. The classical economists were the first to investigate capitalist production; their work laid the foundation for political economy as a science. It looks like your browser needs an update. On the other hand, an increase in aggregate demand causes the price level to _____________ in the long run. - Adam Smith "The wealth of nations" (1776): The book identified land labour and capital as the three factors of production and the major contributors to an nation's wealth. The primary cause of the Great Depression was a decrease in aggregate demand. One of the reasons why the Great Depression was so severe is that: When the U.S. aggregate demand curve shifted to the left during the Great Depression: Savings is crucial to economic growth because it leads to investment in productive capital. Higher tax rates and a banking crisis then drove the economy into a depression. The Keynesian Model 23, p. 91, note). Keynesian economics is a theory of total spending in the economy (called aggregate demand) and its effects on output and inflation. Smith', in Political Thought and the Tudor Commonwealth: Deep Structure, Discourse and Disguise, ed. Main classical economists •Adam Smith (1776-1790), Wealth of Nations 1776 •David Ricardo (1772-1823), Principles of Political Economy and Taxation, 1817 •John Stuart Mill (1806-1873), Principles of Political Economy, 1848 d. support Say's law. Classical theory is the basis for Monetarism, which only concentrates on managing the money supply, through monetary policy. If the supply is high and there is inadequate demand for it, it is a temporary situation. Which of the following factors caused this decrease in consumer sentiment? During the Great Recession, long-run aggregate supply decreased. He was one of the founders of neo-classical economics. __________ would have caused such a decrease. In regard to describing how the economy functions, Keynesian economists claim that: When U.S. aggregate demand and long-run aggregate supply decreased during the Great Recession: real gross domestic product (GDP) also decreased. _______ in aggregate demand could allow real GDP and the unemployment rate to continue in their current direction, The primary cause of the Great Depression was a decrease in aggregate demand. Which of the following economic statements would a classical economist tend to support? After year 2 of the Great Recession, the United States began to experience _______ in real GDP and _______ in the unemployment rate. The unemployment rate was over 25% at the height of the Great Depression. Question 2 Marks: 1 Classical economists argued that Choose one answer. Classical economists believe that all prices are adjustable, therefore, in an inflationary period the increased aggregate demand would result in all prices increasing (including inputs like wages) which would then decrease aggregate supply. B. government policies and spending were needed to keep the economy at full employment. P.A. If a Keynesian economist were asked to make a statement about the relationship between the government and the economy, what might she say? During the Great Recession, the unemployment rate climbed as high as _________ and remained around 8% _________ months after the recession began. During the Great Recession, aggregate demand ________ and long-run aggregate supply ________. Which of the following events would have caused such a decrease? A stock market crash led to a decrease in expected income and tight monetary policy. Answers: A. wages and prices were inflexible, and as a result, the aggregate supply curve was vertical. Classical economics or classical political economy is a school of thought in economics that flourished, primarily in Britain, in the late 18th and early-to-mid 19th century. The Great Recession is characterized by a decrease in aggregate demand. Keynesian economists believe that the economy is unstable and tends toward cyclical unemployment because: prices are sticky and prevent the economy from adjusting to full employment. During the Great Recession, the U.S. ________ curve shifted to the ________. b. believe in Keynesian economics. Classical economics, English school of economic thought that originated during the late 18th century with Adam Smith and that reached maturity in the works of David Ricardo and John Stuart Mill. In comparison with other recessions, the Great Depression: When contrasted with other recessions, the Great Depression: Which of the following facts is/are FALSE regarding the Great Depression and the Great Recession? - In 1936, John Maynard Keynes published The General Theory Employment, Interest and Money. Marshall was probably the most influential economist of his time. This would tend to cause. https://quizlet.com/22547717/macro-economics-ch-11-13-flash-cards The ideal economy is a self-regulating market system that automatically satisfies the economic needs of the populace. Which of the following best summarizes the main causes of the Great Recession? The back-to-back recessions that began in 1929 and ended in 1938 are collectively known as: During the Great Recession, a major financial crisis followed the collapse of housing prices, which led to: the decline in the health of many large financial firms and banks. Which of the following policy statements would a Keynesian economist tend to support? The Great Depression actually consisted of two separate recessions. There are contradictions to any theory, but most can agree on the idea that the future expectations of any economy will affect its consumers. Of the following factors, which would have caused aggregate demand to decrease? Classical economists believe that when aggregate demand changes, the economy remains at full employment because: Prior to the Great Depression, U.S. stock prices decreased dramatically. - Believed that if markets worked freely then the economy would prosper. The ideal economy is a self-regulating market system that automatically satisfies the economic needs of the populace. more focus should be placed on aggregate demand than aggregate supply. During the Great Recession, ___________ caused aggregate demand to decrease. The output or product of an economy was thought to be divided or distributed among the different social groups in accord with the costs borne by those groups in producing the output. During the Great Depression, aggregate demand decreased. A Keynesian believes […] What Is Classical Economics? --> New Classical Emphasized on the role of invisible hands. _______ in aggregate demand could allow real GDP and the unemployment rate to continue in their current direction. Classical economists thought that: A. flexible wages and prices were the principal causes of recessions. there was a severe decline in stock prices. If prompted to describe fundamental beliefs about the economy, a Keynesian economist would state that: more focus should be placed on the short run than the long run. He played a major role in shaping mainstream economic thought during his life. there was a stock market crash at the beginning of the depression. A classical economist would believe that interfering in the market would distort it and that if the economy is left alone to its own devices, prices and wages will find … One difference between the Great Recession and the Great Depression is that: the U.S. government reduced taxes during the Great Recession but raised them during the Great Depression. Which of the following graphs depicts classical economics long run correction of a recession? Keynes wrote The General Theory of Employment, Interest, and Money in the 1930s, and his influence among academics and policymakers increased through the 1960s. These changes occur because of _____________, When the U.S. aggregate demand curve shifted to the left during the Great Depression, Which of the following economic statements would a Keynesian economist tend to support II, The short run deserves more attention than the long run, Classical economists focus on the ___________, while Keynesian economists focus on the ____________, One similarity between the Great Recession and the Great Depression is that, in both episodes, there were significant problems in financial markets, Which of the following policy statements would a classical economist tend to support, The government should allow the economy to adjust to changes in aggregate demand on its own, without interference, During the Great Recession, the U.S. aggregate demand curve shifted to the left, in part, because II, The Great Recession was similar to other recessions since World War II in that, real gross domestic product (GDP) initially declined and then recovered sometime later, Classical economists believe that all prices are adjustable, therefore, in a recession the lack of aggregate demand would result in all prices decreasing (including inputs like wages) which would then increase aggregate supply. 5. 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