Question

For each macroeconomic viewpoint, identify whether it is a position held by classical economists, Keynesian economists, or monetarists. If the viewpoint is shared by more than one group, check all that apply.

a. A decrease in aggregate demand will only lead to a temporary departure from full employment output. Since prices and wages are flexible, the economy will automatically adjust to full employment in the long run.
b. The velocity of money, while not constant, is predictable.

Answer 1

a. Classical theory

b. Monetarist school.

Step-by-step explanation:

Classical theory assumes that the fall in aggregate demand will create temporary affect on employment and ;later in the long run economy will adjust itself and will be at full employment automatically. Keynesian theory believes that demand is the factor which drives the economy. If the economy is at recession then efforts should be made to increase demand which will turn the economy growth upright.