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Chapter 24: Q 18. (page 601)

Do neoclassical economists believe in Keynes鈥� law or Say鈥檚 law?

Short Answer

Expert verified

They believe in say's law.

Step by step solution

01

Step 1. Definition

Say鈥檚 law is a classical economic theory that says that the source of spending that generate demand to purchase current production is simply the income generated by past production and goods sale.

02

Step 2. Explanation

Neoclassical economists are the economists who stressed the importance of aggregate supply in ascertaining the macroeconomy in the long run.

So neoclassical economists are the believer of say鈥檚 law because they think that supply creates its own demand.

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Most popular questions from this chapter

If Congress cuts taxes at the same time that businesses become more pessimistic about the economy, what is the combined effect on output, the price level, and employment using the AD/AS diagram?

Some politicians have suggested tying the minimum wage to the consumer price index (CPI). Using the AD/AS diagram, what effects would this policy most likely have on output, the price level, and employment?

The short-run aggregate supply curve was constructed assuming that as the price of outputs increases, the price of inputs stays the same. How would an increase in the prices of important inputs, like energy, affect aggregate supply?

Describe the mechanism by which demand creates its own supply.

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