Test Prep For AP® Courses


Which kind of issue in the labor market do neoclassical economists think is the least important from a policy perspective?

  1. natural rate of unemployment
  2. full employment
  3. frictional unemployment
  4. structural unemployment
  5. cyclical unemployment

Which statement most closely reflects a position held by a neoclassical economist and not a Keynesian economist?

  1. Government spending should be used to bring an economy out of a recession.
  2. Prices are often sticky and can cause short run economic fluctuations.
  3. There is a short run tradeoff between inflation and unemployment.
  4. Prices are flexible and can help an economy move back to potential.
  5. Raising taxes is a contractionary fiscal policy.

According to the neoclassical economist, what is the shape of the relationship between unemployment and inflation in the long run?

  1. no relationship
  2. negative/downward sloping
  3. positive/upward sloping
  4. horizontal—unemployment can increase or decrease but the inflation rate stays the same
  5. vertical—inflation can increase or decrease but the unemployment rate stays the same