Question 1. Explain why the Aggregate Demand curve is downward sloping . 2. Explain why the Aggregate Supply curve is upward sloping . 3. What determines potential output Yf, and how can the economy exceed Yf in the short run? 4. Explain the Equilibrium condition of Aggregate Expenditure= output Y. How are inventory changes related to AE and Y? 5. Define the multiplier and the marginal propensities to consume (MPC) and save (MPS). What is the relationship between the MPC and the multiplier? 6. Compare and contrast the short run Keynesian and long run Neoclassical views of the aggregate supply and Phillips curves 7. For each the following economies, calculate equilibrium Y*, the multiplier, and the size of the recessionary or inflationary gap, if any. a. AE= 250 +.75 Y Yf= 1200 b. AE= 400+ .9 Y Yf= 3000 c. AE= 300 +. 8Y Yf=1500 d. AE= 300+ .67 Y Yf=1000
Question
1. Explain why the Aggregate Demand curve is downward sloping .
2. Explain why the
3. What determines potential output Yf, and how can the economy exceed Yf in the short run?
4. Explain the Equilibrium condition of
5. Define the multiplier and the marginal propensities to consume (MPC) and save (MPS). What is the relationship between the MPC and the multiplier?
6. Compare and contrast the short run Keynesian and long run Neoclassical views of the aggregate supply and
7. For each the following economies, calculate equilibrium Y*, the multiplier, and the size of the recessionary or inflationary gap, if any.
a. AE= 250 +.75 Y
Yf= 1200
b. AE= 400+ .9 Y
Yf= 3000
c. AE= 300 +. 8Y
Yf=1500
d. AE= 300+ .67 Y
Yf=1000
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