Question

The neoclassical view holds that long-term expansion of potential GDP due to _______________________ will determine ____________________.

Answer 1

Answer:

1.  economic growth;

2.  the size of the economy

Explanation:

According to the neoclassical standpoint on issues relating to macroeconomics, it is believed that, over a long period of time, the economy will vary around its potential GDP and its natural rate of unemployment.

Therefore, the size of the economy is defined by potential GDP, and wages and prices will adjust in an intelligent manner so that the economy will move back to its potential GDP level of output.

Hence, The neoclassical view holds that long-term expansion of potential GDP due to ECONOMIC GROWTH will determine THE SIZE OF THE ECONOMY