Classical and Keynesian Aggregate Supply- Macroeconomics

Mr. Clifton discusses key economic concepts, focusing on classical and Keynesian theories of aggregate supply. The classical model suggests that the economy self-corrects during recessions, while Keynesian theory argues that prices and wages are sticky, preventing automatic recovery. The video explains the different ranges of the aggregate supply curve and how changes in aggregate demand affect employment and inflation.

What does the classical economic model suggest about government intervention during a recession?

• The economy requires monetary policy changes.

• The government should decrease taxes.

• The economy will self-correct without intervention.

• The government should increase spending.

According to Keynesian economics, why do prices and wages not adjust quickly during economic downturns?

• They are flexible.

• They are predetermined.

• They are sticky.

• They are irrelevant.

What is the primary reason Keynesian economics advocates for government intervention?

• To reduce government debt.

• To address sticky prices and wages.

• To increase inflation.

• To stabilize prices.

In which range of the aggregate supply curve does the economy experience full employment?

• Classical range

• Intermediate range

• Keynesian range

• None of the above

What happens to inflation when aggregate demand increases in the classical range?

• Inflation decreases.

• Inflation remains constant.

• Inflation increases.

• Inflation is unpredictable.