Analysis of the short and long runs indicates that the ______ assumptions are most appropriate in ______.
A) classical; both the short and long runs.
B) Keynesian; both the short and long runs.
C) classical; the short run, whereas the Keynesian assumptions are most appropriate in the long run.
D) Keynesian; the short run, whereas the classical assumptions are most appropriate in the long run.

Question

Quizplus · Accepted Answer

In the short run, the economy may experience fluctuations due to factors such as changes in aggregate demand and supply. In this scenario, the Keynesian assumptions are more appropriate as they focus on the role of government intervention and the importance of aggregate demand in determining output and employment levels. However, in the long run, the economy is expected to return to its natural level of output and employment, and the classical assumptions, which emphasize the role of supply factors such as technology and resources in determining output levels, are more appropriate.

Analysis of the Short and Long Runs Indicates That the ______