The distinguishing feature that determines whether an analysis is classical or Keynesian is
A)the speed of price adjustment.
B)the slope of the aggregate demand curve.
C)the degree of monopoly power in the economy.
D)the assumption about the transmission mechanism of monetary policy.

Question

Quizplus · Accepted Answer

The distinguishing feature between classical and Keynesian analysis is the speed of price adjustment. Classical economics assumes that prices, including wages, adjust quickly to equilibrate supply and demand, leading to full employment. In contrast, Keynesian economics suggests that prices and wages adjust slowly, resulting in potential prolonged periods of unemployment.

The Distinguishing Feature That Determines Whether an Analysis Is Classical