CHAPTER 39
Neoclassical View of Aggregate Supply and Demand
LEARNING OBJECTIVES
Name the three markets that comprise the macroeconomy and explain how traditional
economists come to the conclusion that all three markets tend to be in equilibrium.
OUTLINE OF CHAPTER
I. The Concepts of Aggregate supply and Demand
KEY TERMS
Equilibrium
the point at which supply and demand come to be equal
disturbances from outside the system that affect the economy
ANSWERS TO END OF CHAPTER REVIEW QUESTIONS
Name the three markets that comprise the macroeconomy and explain how traditional
economists come to the conclusion that all three markets tend to be in equilibrium.
1. Which neoclassical argument claims that prices and output react in a certain way to
outside shocks so as to lead back to equilibrium?
2. Which neoclassical argument claims that employee compensation and number of
employees hired react in a certain way to outside shocks so as to lead back to
equilibrium?
3. Which neoclassical argument claims that money and interest rates react in a certain way
to outside shocks so as to lead back to equilibrium?
4.
Give a brief history of the evolution of the current traditional economic models of the –
macroeconomy.
5. Who was Wesley Mitchell? Wh
6.
Neoclassical economists in the 1950s argued that recessions result from monetary
APPENDIX 39.1
Blaming the Victim
LEARNING OBJECTIVE FOR APPENDIX 39.1
Compare and contrast the traditional and progressive views of unemployment in the
macroeconomy.
OUTLINE OF APPENDIX 39.1
I. Choice?
ANSWERS TO APPENDIX 39.1 REVIEW QUESTIONS
Compare and contrast the traditional and progressive views of unemployment in the
macroeconomy.
1. What is the traditional view of involuntary unemployment?
Neoclassical economists argued that involuntary unemployment on a large scale is
2. How would conservative economists explain the high unemployment rates of the Great
depression? How would progressive economists?
Conservative economists explain unemployment as a voluntary refusal of the unemployed