Question

Countries like China and other developed economies are in the Neo classical zone. What is the best option for these countries to sustain their economies?

a.
Decrease aggregate demand

b.
Increase aggregate supply

c.
Move back to Keynesian Zone

d.
Move back to intermediate zone​

Answer 1

c. Move back to Keynesian Zone

Step-by-step explanation:

• The Keynesian zone is a model that states the stable level of GDP is far from potential GDP and that economy is in a period of recession. Unemployment is high and the demands shift from the right to left of the curve.

• It can be determined by the level of output and employment. The Neoclassical zone will occur when the right side of the curve is fairly vertical, a rise in demand will affect the process but will indirectly impact the output.