Complete the following table by matching the macroeconomic assumptions about aggregate supply to the appropriate school of thought.AssumptionClassicalKeynesianOnly an increase in aggregate demand can move an economy out of a recession and back to potential real GDP quickly. Product prices and wages tend to be inflexible. The following graph shows the aggregate demand (ADAD) and aggregate supply (ASAS) curves for a hypothetical economy that is currently operating below its full-employment output level. That is, the economy is currently in a recession.The aggregate supply curve (ASAS) in this diagram is consistent with the view of aggregate supply. According to this viewpoint, the government should spending in response to the recession. Shift the appropriate curve on the graph to illustrate the impact of this change in government spending. ADASPRICE LEVELREAL GDP (Trillions of dollars)AD AS The prescribed change in government spending will:Decrease the price level and move the economy toward full employment Increase the price level with no change in real GDP Move the economy toward full employment with no change in the price level Complete the following table by matching the macroeconomic assumptions about aggregate supply to the appropriate school of thought.Classical KeynesianAssumptionOnly an increase in aggregate demand can move an economy out of a recession and back to potential real GDP quickly.Product prices and wages tend to be inflexible.The following graph shows the aggregate demand (AD) and aggregate supply (AS) curves for a hypothetical economy that is currently operatingbelow its full-employment output level. That is, the economy is currently in a recession.The aggregate supply curve (A.S) in this diagram is consistent with thegovernment shouldspending in response to the recession.view of aggregate supply. According to this viewpoint, the Shift the appropriate curve on the graph to illustrate the impact of this change in government spending.PRICE LEVELREAL GDP (Trillions of dollars)ADASADOAS?The prescribed change in government spending will:O Decrease the price level and move the economy toward full employmentO Increase the price level with no change in real GDPO Move the economy toward full employment with no change in the price level

Classical model and Keynesian model are two different school of thoughts that describes an economy.

Answered: Complete the following table by…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Complete the following table by matching the macroeconomic assumptions about aggregate supply to the appropriate school of thought.

Assumption	Classical	Keynesian
Only an increase in aggregate demand can move an economy out of a recession and back to potential real GDP quickly.
Product prices and wages tend to be inflexible.

The following graph shows the aggregate demand (ADAD) and aggregate supply (ASAS) curves for a hypothetical economy that is currently operating below its full-employment output level. That is, the economy is currently in a recession.

The aggregate supply curve (ASAS) in this diagram is consistent with the view of aggregate supply. According to this viewpoint, the government should spending in response to the recession.

Shift the appropriate curve on the graph to illustrate the impact of this change in government spending.

ADASPRICE LEVELREAL GDP (Trillions of dollars)AD AS

The prescribed change in government spending will:

Decrease the price level and move the economy toward full employment

Increase the price level with no change in real GDP

Move the economy toward full employment with no change in the price level

Complete the following table by matching the macroeconomic assumptions about aggregate supply to the appropriate school of thought.
Classical Keynesian
Assumption
Only an increase in aggregate demand can move an economy out of a recession and back to potential real GDP quickly.
Product prices and wages tend to be inflexible.
The following graph shows the aggregate demand (AD) and aggregate supply (AS) curves for a hypothetical economy that is currently operating
below its full-employment output level. That is, the economy is currently in a recession.
The aggregate supply curve (A.S) in this diagram is consistent with the
government should
spending in response to the recession.
view of aggregate supply. According to this viewpoint, the

Shift the appropriate curve on the graph to illustrate the impact of this change in government spending.
PRICE LEVEL
REAL GDP (Trillions of dollars)
AD
AS
AD
O
AS
?
The prescribed change in government spending will:
O Decrease the price level and move the economy toward full employment
O Increase the price level with no change in real GDP
O Move the economy toward full employment with no change in the price level

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