Before 1929 the quality of data on output is of poor quality. Research by Christina Romer suggests that methods for estimating historical data typically exaggerated the size of cyclical fluctuations. She claims that pre-Depression cycles were on average only 25% or so larger than post-1945 cycles. It had previously been thought that pre-Depression cycles were twice as severe as those after World War II. Since World War II governments of the major industrialized countries have played an active role in attempting to stabilize their economies. The government played a very limited role in economic stabilization before the Depression. This evidence by Christina Romer: a. supports the views of neither New Classical or Keynesian economists
b. supports the views of both New Classical and Keynesian economists
c. supports the views of Keynesian but not New Classical economists
d. supports the views of New Classical economists but not Keynesian economists

d. supports the views of New Classical economists but not Keynesian economists

Explanation:

The problem with classical economists is that they continue to argue that the economy will balance itself on its own and government intervention is not needed. They are wrong. Classical economics were discarded almost 90 years ago because according to them it was impossible for recessions to exist, but the Great Depression was destroying the world's economy (including the US). The sacred premise of the long run in classical economics is not true. The long run refers to an indefinite point in the future, that can be 10, 100 or 100,000 years in the future. Keynes wonderfully described the long run and the only thing certain about it: "we are all going to be dead in the long run".

The problem with Romer's study is that it compares different time periods and unrelated events. Yes, Keynesian policies reduced recession by 25%, but what would have happened if classical economic policies were in place. How many Great Depressions were avoided by not following their ideas? Before, classical economists argued that the inflation rate had to be 0% or as close to 0% as possible because it was better in the long run. Nowadays, the world has proven that they were wrong, again, and that the inflation rate should be between 1 - 2% in order for an economy to be able to grow. Their belief in constant velocity of money is not true either.

Theoretically, classical economics are great, but in the real world their policies do not work.

it will get mixed up

explanation: