Part 1 - Check Your Understanding - For each of the following statements, identify whether the speaker is most likely a Keynesian or classical economist. Then, write a version of that statement from the opposite perspective.

1. The government should smooth out short-run fluctuations in the business cycle because the short run is more relevant than the long run.

2. Recessions are the result of negative demand shocks and sticky wages. Recessions can persist indefinitely unless the government stimulates the economy.

3. Government stimulus results in malinvestments that distort market prices and the inefficient use of resources.

4. If a recession is caused by a fall in aggregate demand, it will be temporary because prices and wages will fall and the economy will self-correct.