Question

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

Answer 1

Answer:

economic growth; the size of the economy.

Explanation:

Gross Domestic Products (GDP) is a measure of the total market value of all finished goods and services made within a country during a specific period.

Simply stated, GDP is a measure of the total income of all individuals in an economy and the total expenses incurred on the economy's output of goods and services in a particular country. Also, Gross Domestic Products (GDP) is a measure of the production levels of any nation.

Basically, the four (4) major expenditure categories of GDP are consumption (C), investment (I), government purchases (G), and net exports (N).

The new classical theory also known as the neoclassical economic theory is one that repudiates and tends to restructure the John M. Keynes theory of macroeconomics, popularly referred to as the Keynesian Macroeconomics theory.

The new classical theory argues that efficient demand and supply is the most important feature or key behind the level of output, pricing, and consumption of goods and services by the people at a specific period of time in a country. Also, the new classical theory assumes that the wages of the employees in a country is flexible in contrast to the Keynesian macroeconomic theory.

The neoclassical view posits that long-term expansion of potential Gross Domestic Products (GDP) due to economic growth will significantly determine the size of a country's economy.

However, the economy cannot sustain production above its potential Gross Domestic Products (GDP) in the long run.

A distinguishing characteristic of the neoclassical view from other economic theory such as the Keynesian Macroeconomics theory, is flexibility of wages and prices over time.