L13 Recessions

Open Ended

What do you predict would be the impact of the “Cash for Clunkers” program on Aggregate Demand and Aggregate Supply in the SHORT RUN? What about the LONG RUN?

Multiple Choice

Classical economists will generally focus on policies that will

• Cause short-run AD changes

• emphasize increasing the LRAS

• cause people to spend less money

• prevent GDP from increasing too fast

Multiple Choice

What is the main reason Keynes believed that the economy won't return to equilibrium after a decrease in AD?

• The ineffectiveness of government intervention

• People wanted to remain in the depression because of lower prices

• Sticky wages

• Imperfect information

Open Ended

What would a Keynesian economist think about the Cash for Clunkers program? How would a Classical (or Austrian) economists’ perspective be different?