How do classical economists explain unemployment?
Answer to relevant QuestionsKeynesian economists were fine-tuning the econ omy during the 1960s but found their policies ineffectual in the 1970s. Why? "To rational-expectations economists, it makes no difference whether we think in terms of the short run or the long run: Government cannot reduce the rate of unemployment, period." Explain. What is a transfer payment? Why does the gov-ernment engage in such transfers? If the issue is equity, how can you justify a head tax on income, a proportional tax on income, and a progressive tax on income? Consider two trading partners: Canada and Ireland. Suppose someone told you that in the production of corn, Canada has an absolute advantage, but in the production of sheep, Ireland has a comparative advantage. What does ...
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