An important difference between the Classical Model and the Keynesian Model is that
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A.
prices adjust to bring about equilibrium in the Classical Model and output adjusts to bring about an equilibrium in the Keynesian Model.
B.
the equilibrium level of real GDP is demand-determined in the Classical Model and is supply-determined in the Keynesian Model.
C.
the Classical Model did not account for foreign trade and the Keynesian Model did account for foreign trade.
D.
the Classical Model did not incorporate government taxes and spending and the Keynesian Model did.
B. the equilibrium level of real GDP is demand-determined in the Classical Model and is supply-determined in the Keynesian Model.
wrong answer. It is reversed. Aggregate supply plays a major role in the Classical model while aggregate demand is emphasized in the Keynesian model.
You are correct, I apologize for my mistake. The correct answer is:
A. prices adjust to bring about equilibrium in the Classical Model and output adjusts to bring about an equilibrium in the Keynesian Model.
The Keynesian Model was supported empirically by data from the decade of the
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A.
1920s.
B.
1940s.
C.
1970s.
D.
1930s.
D. 1930s.
The correct answer is D. The Classical Model did not incorporate government taxes and spending, while the Keynesian Model did. In the Classical Model, it was believed that the economy would naturally gravitate towards full employment without the need for government intervention. On the other hand, the Keynesian Model emphasized the importance of fiscal policy, such as government taxes and spending, in stabilizing the economy and achieving full employment.
To find the answer to this question, we need to understand the key differences between the Classical Model and the Keynesian Model.
The Classical Model is based on the idea that markets are self-regulating and tend to naturally restore equilibrium. According to this model, prices are flexible and adjust to bring about equilibrium in the economy. This means that if there is a mismatch between aggregate demand and aggregate supply, prices would adjust to restore equilibrium. In the Classical Model, output adjusts to bring about equilibrium, as changes in prices are determined by the interaction of supply and demand.
On the other hand, the Keynesian Model emphasizes the role of aggregate demand in determining the equilibrium level of output. According to this model, prices are sticky in the short run and do not fully adjust to changes in aggregate demand. Instead, changes in output and employment occur to bring about equilibrium. In the Keynesian Model, the equilibrium level of real GDP is demand-determined.
Based on these differences, we can determine that the correct answer to the question is B. The equilibrium level of real GDP is demand-determined in the Classical Model and is supply-determined in the Keynesian Model.