TOPIC: Questioning the classical position 1. Questioning the classical positionKeynes believed that an economy is not necessarily self-regulating. Which of the following are aspects of Keynes's critique of classicaleconomics? Check all that apply.The economy quickly adjusts to a long-run equilibrium.Say's law holds.Wages and prices may be inflexible.The economy is inherently unstable.The following graph shows the aggregate demand (AD), short-run aggregate supply (SRAS), and long-run aggregate supply (LRAS) curves of aneconomy.PRICE LEVEL300270240AD210180150120+*+90603000 100 200CLRASSRÅS300 400 500 600 700 800 900 1000REAL GDP (Billions of dollars)Point A on the graph shows the state of the economy inmove to point B via self-regulation, move to point C viagovernment intervention, move to point C via self-regulation, or get stuck at point A for an extended periodLong-runequilibrium, aninflationary gap, or arecessionary gapKeynesian economists believe that the economy might

1. Explanation for Question 1:The statement "the economy quickly adjusts to a long-run equilibrium"…

Answered: 1. Questioning the classical position…

Exploring Economics

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ISBN:9781544336329

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Chapter22: Aggregate Demand And Aggregate Supply

Section: Chapter Questions

Problem 16P

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of The economy of Langoria is currently in a state of long-run equilibrium in which the economy is producing at its Natural Real GDP. The level of Real GDP is currently 3 trillion dollars, and the price level is 130. 100 PRICE LEVEL 170 160 150 140 130 120 110 100 2 Changes in a Self-Regulating Economy AD AD₂ BRAS 1 2 3 LRAS 23
1. What will happen to Real GDP if autonomous spending rises and the economy is operating in the horizontal section of the Keynesian AS Curve?. Explain your answer with appropriate illustrations.
Which of the following statements about Keynes' contribution to macroeconomics is correct? A. Although he published his most important ideas about the economy long before the 1930s, few economists paid attention to Keynes until the Great Depression proved him correct B. Keynes argued that depressions and recessions were almost always caused by changes in the money supply C. Keynes argued that balancing the budget could be an effective way to cure a recession or depression D. All of the above E. None of the above
Hello, I would like help on this assignment Thank you, Keynes & Friedman Explain how Keynes theorized the government could improve macroeconomic outcomes, especially in a recession. Use a diagram in your explanation. Include the pros and cons of this theory. Explain how Friedman theorized macroeconomic outcomes could be improved. Use a diagram in your explanation. Include the pros and cons of this theory. Contrast Keynes and Friedman theories on how to improve economic outcomes. Recently in the WSJ, there was an article about the issues of high levels of debt explain how this relates to both Keynes and Friedman.
Suppose that an economy begins in equilibrium at E, as depicted in the graph to the right. 140- Assume that the economy follows the Classical Model assumptions. LRAS a. Using the line drawing tool, draw a new aggregate demand (AD) curve reflecting an increase in the amount of money in circulation. Properly label this line. 130- 120- Carefully follow the instructions above, and only draw the required objects. 110- b. During the rapid adjustment period (that results from the change in the AD curve), the economy will immediately tend toward a price level that remains constant and a level of real GDP that increases E1 before quickly returning to full employment. 100- c. Now that the macroeconomy in a disequilibrium, what happens in the labor market? 90- O A. Unemployment decreases, which increases wages. AD 80- O B. Workers unionize to negotiate higher wages so the economy continues to overproduce. OC. Wages decrease to reuduce production. 70- 60- O D. The government imposes a minimum wage…
The graph below shows an economy in long-run equilibrium. Suppose that aggregate demand unexpectedly increases so that the short-run equilibrium real GDP increases above $80 billion. a. Using the AD AS graph below, demonstrate the new price level and long-run equilibrium real GDP that will result, assuming that the new classical view of a self-correcting economy is accurate. Instructions: Use the tools provided 'AD2' and 'AS2' to plot AD and AS after the increase in aggregate demand and the economy's self-correction. Price level 130 120 110 100 90 80 AS AD₁ AS Tools AD₂
Keynes broke with the classical and neo-classical economic perspective in regards to the belief of in self-correcting free markets. Discuss and explain Keyne's critique of Say's law and discuss why Keynes argued markets could reach equilibrium below the natural rate of unemployment.
According to Keynesian economists, if people in the economy are not spending enough then the __________ should step in to fill the gap. a federal reserve b markets c federal government d banks
Suppose the marginal propensity to consume is 0.6. Use the Keynesian Cross model to predict the impact on equilibrium income of each of the following policies. State the direction of the change and give a formula for the size of the impact. a. an increase in government purchases of $100billion b. an increase in taxes of $100 billion c. a $100 billion increase in both government purchases and taxes?
Keynes thought that one macroeconomic problem is that an economy: a. can be pushed below the equilibrium level of output by fiscal policy. b. always operates at the potential and business cycles are created by government intervention. c. can be pushed away from the potential if prices and wages are flexible. d. can tend toward an equilibrium level of output that is below the potential level. e. will move back to its potential after a business cycle on its own.
5. Show how to derive the aggregate demand curve using the fixed-price Keynesian model.
10. According to Keynes, which of the following should occur because of a decrease in government expenditure, ceteris paribus? A. A leftward shift of the aggregate supply curve. B. A rightward shift of the aggregate supply curve. C. A leftward shift of the aggregate demand curve. D. A rightward shift of the aggregate demand curve. 11. Ceteris paribus, A. A decrease; a decrease B. A decrease; no change C. An increase; a decrease D. An increase; no change in consumer confidence will cause C. Net exports. D. Fiscal policy. 12. Expenditures on new plant and equipment plus changes in business inventories defines: A. Aggregate demand. B. Investment. in aggregate demand. 13. When calculating aggregate demand, government expenditure: A. Includes income transfers. B. Includes expenditures by the federal government but not state and local government. C. Represents the largest component of aggregate demand for the United States. D. Includes spending by federal, state, and local governments on…

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