Neoclassical
What core assumption does
Neoclassical economics make about consumer behavior?
Consumers act rationally to maximize utility
What is the main focus of Keynesian Econ during a recession
Boosting aggregate demand through government intervention.
What assumption does
Neoclassical economics make about price flexibility?
Prices are flexible and adjust to changes in supply and demand.
Who is considered the founder of Keynesian economics?
John Maynard Keynes.
What type of fiscal policy do Keynesians support in a recession?
Expansionary fiscal policy-higher government spending or tax cuts.
In Neoclassical economics, what role do prices play in markets?
Prices act as signals that coordinate supply and demand
How does Keynesian economics view unemployment in the short run?
As a result of insufficient demand.
According to Keynes, why might markets fail to reach full employment?
Because of sticky wages and prices that prevent adjustment.
Which Neoclassical economist is known for developing rational expectations theory?
Robert lucas
How do Neoclassical economists generally view government intervention?
As often unnecessary or even harmful, since markets are self-regulating.
What is the Neoclassical view on the flexibility of wages and prices?
Wages and prices are flexible and adjust to restore equilibrium
What is the Keynesian multiplier effect?
The idea that an initial increase in spending leads to a larger increase in overall economic output.
What is "Say's Law," and which school of thought supports it?
Supply creates its own demand; supported by Neoclassical economists.
What famous quote is attributed to Keynes about the long run
"In the long run, we are all dead”
Which theory supports automatic stabilizers like unemployment benefits?
Keynesian economics.
How does Neoclassical theory explain long-term economic growth?
Factors like technology productivity
How does Keynesian theory differ from classical theory on market self-correction?
Keynesians believe markets may not self-correct quickly due to rigidities.
How does Keynesian theory view the efficiency of markets in the short run?
Markets can be inefficient and may need intervention.
What was the title of Keynes' most influential book?
The General Theory of Employment, Interest and Money.
How do Neoclassical economists prefer to manage economic fluctuations?
Through long-run market adjustments and monetary policy, not active fiscal policy.
What is the concept of "marginal utility, and why is it immortant in Neoclassical economics?
Refers to the additional satisfaction from consuming one more unit
Why does Keynesian economics support deficit spend
during downturns?
To stimulate demand and reduce unenployment
What assumption about information is central to Neoclassical models?
Which economist is associated with the Neoclassical growth model?
Robert solow
What's the Neoclassical view on using taxes and subsidies to steer the economy?
These should minimized to allow efficient market outcomes