Economics Multiple Choice Question – 2 October 2017

Which ONE of the following statements is correct?

Select ONE answer:

1. The Keynesian long-run AS curve implies that an economy may have a negative output gap in the long run
2. The Keynesian long-run AS curve is perfectly inelastic at all levels of real national output
3. The classic long-run AS curve implies that an economy may have spare capacity in the long run
4. The classical long-run AS curve is perfectly elastic at all levels of real national output
5. The classical long-run AS curve implies that an economy may have a negative output gap in the long run

Define the term productivity:
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This is multiple choice question is suitable for Economics KS5 classes.

The answer is 1 – Keynesians believe the long run aggregate supply can be upwardly sloping and elastic. They argue that the economy can be below the full employment level, even in the long run. For example, in recession, there is excess saving, leading to a decline in aggregate demand. Keynesians also believe wages and prices can be sticky, and therefore, economies don’t automatically return to full employment equilibrium.

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