Classical Analysis of Aggregate Supply Flashcards
1
Q
Adam Smith
A
name most commonly associated with classical economic theory
2
Q
key concepts
A
- the “invisible hand” of the market will always guide an economy back to equilibrium
- limited government intervention
- assumes we always fully efficient in using the factors of production
- theorize that real output levels remain the same regardless of average price levels
3
Q
implications of a vertical LRAS curve
A
economies are always at full efficiency (always in equilibrium)
4
Q
govt. should do which of the following for the economy
A
leave the economy completely alone
5
Q
according to the classicists, the lras curve is only what
A
vertical
6
Q
what happens if you lower the prices of products on the market
A
no impact on output
7
Q
curves
A
similar in nature
8
Q
increase in GDP will result in which of the following for the average price level
A
increase
9
Q
change in APL results in
A
no change in production
