Classical vs Keynesian macroanalysis

Question 1

term for distance from full employment in keynesian LRAS

Answer 1

slack

Question 2

bottlenecking

Answer 2

the point on a keynesian LRAS where price level rises rapidly with little rise in output

Question 3

keynesian assumptions

Answer 3

1. “in the long run we’ll all be dead”
2. wages are sticky downwards
3. animal spirits
4. govs need to intervene in markets
5. govs need to intervene when the economy is in a recession

Question 4

classical assumptions

Answer 4

1. markets are efficient (no need for gov intervention
2. the economy will self correct
3. self interest of economic agents
4. market mechanisms/ invisible hand
5. profit maximisation