Question

1. In the Classical economy, only pure public goods would be produced. True False

2. Except for recognizing minor economic fluctuations, the original classical school proposes that: actual GDP always equals potential GDP, making all unemployment involuntary. actual GDP never equals potential GDP, making all unemployment involuntary. actual GDP always equals potential GDP, making all unemployment voluntary. actual GDP is always greater than potential GDP.

3. Supply side economics focused on which of the following? cutting government regulations. cutting the high marginal tax rates. cutting the size of government. all of the answers in this questions are correct.

Answer 1

1.False –

Public good is a good where use by one individual does not reduce availability to others or the goods can be effectively consumed simultaneously by more than one person. Public goods include knowledge, official statistics, national security, common languages, flood control systems, lighthouses, and street lighting. Hence it is not necessary that in a classical economy only Public Goods are produced.

2. actual GDP always equals potential GDP, making all unemployment involuntary.

the highest sustainable level of aggregate real GDP or "potential" is seen as corresponding to a vertical LRAS curve: any increase in the demand for real GDP can only lead to rising prices in the long run, while any increase in output is temporary.

3. All of the above

Supply-side economics is a argues that economic growth can be most effectively created by lowering taxes and decreasing regulation and by decreasing the size of the Government