1. Explain why, according to Keynes, the money wage would not adjust sufficiently to keep the economy at full employment. 2. Derive the Keynesian aggregate demand schedule for the case in which investment is completely interest inelastic. Explain the resulting slone of the aggregate demand-

1. Explain why, according to Keynes, the money wage would not adjust sufficiently to keep the economy at full employment. 2. Derive the Keynesian aggregate demand schedule for the case in which investment is completely interest inelastic. Explain the resulting slone of the aggregate demand-

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

1. Explain why, according to Keynes, the money wage would
not adjust sufficiently to keep the economy at full
employment.
2. Derive the Keynesian aggregate demand schedule for the
case in which investment is completely interest inelastic.
Explain the resulting slope of the aggregate demand-
schedule for this case.
3. Explain the consequence of combining the Classical theory
of aggregate supply with the Keynesian system of demand
schedule.

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