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Chapter 36 current issues in macro theory and policy problem number 13.
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In the given question, we have to place monitorist relational expectations and mainstream views, respectively.
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We have given some statements through which we have to place these words.
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First statement is, anticipated changes in aggregate demand affect only the price level, they have no effect on real output.
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This statement belongs to racial expectations, that is, r .e.
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This is because the theory says that the economy will self -adjust when there are changes in aggregate supply such that real output is the same as before, but the price level will change.
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Come to the next statement that is downward wage, inflexibility means that decline in aggregated demand can cause long -lost recession.
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This statement relates to mainstream economists, that is m -a -i.
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Mainstream economists says that the economy can get much.
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In recession for several months or more because of downward price and wage inflexibility.
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Next statement is, changes in the money supply and increase pq at the first only q rises because nominal wages are fixed but once workers adapt their expectations to new realities, p rises and q returns to its formal level...