The Policy Implications of the Neoclassical Perspective

Review Questions

Do neoclassical economists tend to focus more on long term economic growth or on recessions? Explain briefly.

Do neoclassical economists tend to focus more on cyclical unemployment or on inflation? Explain briefly.

Do neoclassical economists see a value in tolerating a little more inflation if it brings additional economic output? Explain your answer.

If aggregate supply is vertical, what role does aggregate demand play in determining output? In determining the price level?

What is the shape of the neoclassical long-run Phillips curve? What assumptions do economists make that lead to this shape?