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Questions and Answers
What does the term 'Effective Demand' refer to in macroeconomics?
What does the term 'Effective Demand' refer to in macroeconomics?
- The theoretical output level where all resources are fully employed
- The overall level of supply that meets aggregate demand
- The total income generated in an economy over a specific period
- The quantity of goods and services that consumers are willing and able to purchase at a given price level (correct)
Which of the following is a key difference between classical and Keynesian theories in macroeconomics?
Which of the following is a key difference between classical and Keynesian theories in macroeconomics?
- Classical theory rejects the concept of effective demand, while Keynesian theory supports it.
- Both theories advocate for extensive government intervention in the economy.
- Classical theory suggests markets are always clear, whereas Keynesian theory emphasizes market imperfections. (correct)
- Keynesian theory asserts that all economies naturally reach equilibrium, while classical theory does not.
What role does Aggregate Supply play in income and output determination?
What role does Aggregate Supply play in income and output determination?
- It represents the total quantity of goods and services that producers are willing to supply at different price levels. (correct)
- It is the measure of total spending in the economy by households and businesses.
- It reflects only the services supplied in the economy, ignoring goods.
- It indicates the fixed capacity of an economy to produce at a maximum level.
How does the Keynesian approach to aggregate demand differ from classical economics?
How does the Keynesian approach to aggregate demand differ from classical economics?
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What is the purpose of national income accounting in macroeconomics?
What is the purpose of national income accounting in macroeconomics?
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