Keynes believed that prices and wages were rigid or fixed until the economy reachesequilibriumfull employmentrecessionexpansionWhich of the following did John Maynard Keynes believe held the key to understanding fluctuations in investment?how people spend their moneyhow businesses make predictionshow inflation affects the economyhow governments enact policyWhich of the following best characterizes the relationship between real GDP and aggregate expenditures under theaggregate expenditure model?unimportantinversedependentuncertainOutput decreases when aggregate expendituresincreasedecreasestagnatedestabilizeIn the early 1980s, the government used fiscal policy to fight a recession byincreasing tax rateslowering tax rateslimiting government spendingsuspending unemployment benefits.

"Keynesian economics" is a type economic theory that is established by the British economist John…

Answered: Keynes believed that prices and wages…

Keynes believed that prices and wages were rigid or fixed until the economy reaches equilibrium full employment recession expansion

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Question

Keynes believed that prices and wages were rigid or fixed until the economy reaches
equilibrium
full employment
recession
expansion
Which of the following did John Maynard Keynes believe held the key to understanding fluctuations in investment?
how people spend their money
how businesses make predictions
how inflation affects the economy
how governments enact policy
Which of the following best characterizes the relationship between real GDP and aggregate expenditures under the
aggregate expenditure model?
unimportant
inverse
dependent
uncertain
Output decreases when aggregate expenditures
increase
decrease
stagnate
destabilize
In the early 1980s, the government used fiscal policy to fight a recession by
increasing tax rates
lowering tax rates
limiting government spending
suspending unemployment benefits.

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An increase in demand in total demand in the Keynesian range of an aggregate supply curve will cause unemployment and deflation increase employment, output, and the price level. Increase the price level, but not employment and output. increase employment and output, but not the price level.
If private sector businesses suddenly lose confidence in the economy, Keynes argued that this would likely lead to a _________ shift in the investment schedule and thus a __________ shift in the AD schedule. (Choose the appropriate answer.)
According to Keynes’ Law... A) The total demand for products determine the level of gross domestic product and may not equal the supply capacity of the economy in the short run. B) The total demand always equals the total supply capacity in the short run. C) The total demand tends to rise above the total supply capacity in the short run which leads to recessions D) The total supply of products determines the level of gross domestic product and the level of demand in the economy in the long run.
When in macroeconomics an economy ‘overheats’ it is observed that aggregate demand exceeds national income at the full employment output level. Within a ‘Keynesian cross’ framework this overheating is described as which of the following: (a) A Goldilocks effect; (b) A hyperinflation; (c) A recessionary gap; (d) An inflationary gap Please illustrate the correct answer via a diagram.
An economy is at full employment. Which of the following can create an inflationary gap. Group of answer choices An increase in nominal wages. An increase in income taxes. An increase in government spending. A decrease in government spending.
Keynes believed that an increase in government expenditure during a recession would not result in significant inflation because he assumed that: Answers: A. Aggregate demand was vertical during a recession. B. The market would self-adjust to reach full employment. C. Aggregate supply was horizontal during a recession. D. The government would impose price ceilings during a recession.
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.
If the intersection of AD and SRAS occurs at $21 trillion GDP but full employment GDP (LRAS) is at $22 trillion GDP, which of the following policy choices would help move the economy toward full employment? a) Lowering income taxes and payroll taxes for all employees. b) All of the choices would help increase AD and bring the economy closer to full employment. c) increasing the money supply to lower interest rates. d) Increases government spending on infrastructure. e) Sending out stimulus checks to everyone earning less than $100,000 per year.
Consider an economy currently in recession. Which is NOT a policy move that could assist the economy, as discussed in class? Raising the money supply Raising government spending Lowering bank reserves Lowering interest rates
Which of the following statements is true? Question options: Keynes believed wages and prices are often too flexible - falling wages can cause a recession. Keynes believed an economy could get stuck in a recessionary gap. Keynes advocated running government surpluses in times of recession. Keynes believed the economy is self-regulating. b and c
In the 1960s the U.S entered the Vietnam War, and military expenditures (part of government expenditures) grew from an annual rate of $113 billion to 138 billion. The economy was near full-employment and, therefore, given there was no offsetting tax increase, inflation pressures emerged. Assume the MPC is .75 A) How did the increase in military expenditures affect AD? B) If in 1968 the AD Excess was $150 billion, what change in government expenditures would you have recommended?
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