Suppose that currently, the South African economy is in an expansionary phase. The proposed “Exit tax” by the National Treasury would resemble which of the following macroeconomic schools of thought? a) Keynesian theory b) Classical theorists c) Marxist economics d) Monetarist economics

Suppose that currently, the South African economy is in an expansionary phase. The proposed “Exit tax” by the National Treasury would resemble which of the following macroeconomic schools of thought? a) Keynesian theory b) Classical theorists c) Marxist economics d) Monetarist economics

MACROECONOMICS FOR TODAY

10th Edition

ISBN:9781337613057

Author:Tucker

Publisher:Tucker

Chapter16: Monetary Policy

Section16.A: Policy Disputes Using The Self Correcting Aggregate Demand And Supply Model

Problem 10SQ

See similar textbooks

Related questions

Q: Which of the following best describes the concept of 'rational expectations' in the context of…

A: We need to understand what 'rational expectations' means in macroeconomic theory. This concept…

Q: Three of the following are economic policies advocated by the Monetarist critics of Keynesian…

A: Keynesian economics criticized the monetarist economics greatly.

Q: Suppose that, in an attempt to combat severe unemployment, the government decides to increase the…

A: The AS-AD model in macroeconomics is used to comprehend and explain how changes in aggregate demand…

Q: The impact of Keynesian Policy can be diminished by secondary effects such as: a)Inflation – to the…

A: Keynesian theory is a part of the macroeconomics study that explains the impact of any variation in…

Q: Consider the AD-AS model discussed during the lectures. Assume that the aggregate demand curve is…

A: The macroeconomic model of AD-AS explains how the exogenous events and fluctuations in business…

Q: The economy in Country X is in a recession, with real gross domestic product (GDP) $100 billion…

Q: Select the answer that best describes Keynesian and Classical economic theories. Classical…

A: Answer: The classical theory explains that the economy moves between equilibria without government…

Q: How were the Keynesian, Monetarist and New Classical theories of the economy synthesized to develop…

A: Keynesian Theory: Keynesian hypothesis places that total interest won't generally meet the stock…

Q: a)Keynesian economists believe that the business cycle is caused by external factors, such as…

A: : Models of economics: A money related model is a smoothed-out variation of reality that grants us…

Q: Which of the following describes the use of Keynesian macroeconomic policy to resolve an…

A: Inflationary gap is the difference between actual real GDP and potential real GDP.

Q: The natural rate of unemployment (NRU) is the long-run equilibrium rate of unemployment within the…

A: The natural rate of unemployment (NRU) refers to that state of unemployment where the economy is at…

Q: Compare and contrast the Keynesian approach to the management of the level of aggregate demand to…

A: Aggregate demand (AD) is a macroeconomic concept that represents the total amount of goods and…

Q: Which of the macroeconomic policies listed below is contractionary and will help reduce the rate of…

A: Macroeconomic policy refers to the deliberate actions and strategies implemented by a government or…

Q: A Keynesian economy is described by the following equations. Consumption Cd =…

A: Keynesian economy states that AD(aggregate demand) has the potential to affect both output and…

Q: of the following is an effective fiscal tool to control inflation in boom times? a) Reducing…

A: Fiscal policy refers to a policy of the government which involves changes in taxes and spending to…

Q: According to Keynesian Theory, stabilization policy (i.e. Aggregate Demand Management) should not be…

A: Uncertainty refers to a state of incomplete knowledge or information about future events, outcomes,…

Q: The use of money and credit controls to influence macroeconomic activity is: A) monetary policy…

A: Controlling money refers to the control of the money supply in an economy as high and low money…

Q: Which of the following supports the argument for hands-off policy? A. Monetary policy does not…

A: Fine-Tuning:Fine-tuning refers to the deliberate and precise adjustment of economic policies, such…

Q: Which characteristics are associated with the Keynesian theory? Choose all that apply. Group of…

A: This theory is a macroeconomic theory that defines the role of government intervention in addressing…

Q: The Keynesian economic framework is based on an assumption that: A) an increase in government…

A: In economics, different frameworks have different assumptions. And this difference in assumptions…

Q: The following events have occurred in the history of the United States:  A deep recession hits the…

A: Classical approach A recession is a phase which results into fall in the trading and industrialist…

Q: Which of the following is the impulse in the Keynesian business cycle A change by the Fed in the…

A: In Keynesian business cycle, impulse is firms expectations.

Q: According to the Keynesian model, demand shocks affect output in the short run because:…

A: The Keynesian View of the AD–AS Model uses an AS curve which is horizontal at levels of output below…

Q: Assume the U.S. economy is already operating above the full-employment level of GDP (i.e., above…

A: Given information: US economy is operating above full employment, it means beyond the full…

Q: Household behavior that is not responsive to budget deficit policies is a concept put forward by...…

A: Budget deficit happens when the income of the government falls short of its expenses. In such cases,…

Concept explainers

Laffer Curve Analysis

In terms of economics, the Laffer curve was popular among those economists who were or who belonged to the supply side of the economic peripheral. This concept was popularized by the famous supply-side economist known as Arthur Laffer. This curve illustrated the relationship between the tax rates and government revenue. It is already known that the tax which the public or individuals residing in an economy bear is the revenue or income of the government with the help of which the government does all the necessary works in the society, which is beneficial for the economy.

Question

a) Keynesian theory

b) Classical theorists

c) Marxist economics

d) Monetarist economics

Branch of economics that analyzes the behavior and performance of an economy as a whole. It focuses on the study of aggregates and evaluates changes related to unemployment, gross domestic product, inflation, monetary and fiscal policies of the government.

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

SEE SOLUTION Check out a sample Q&A here

Step 1

VIEW

Step 2

VIEW

Step by step

Solved in 2 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.

Similar questions

Which characteristics are associated with the Keynesian theory? Choose all that apply. Group of answer choices Flexible prices Long-run view Long-run aggregate supply primarily affects economic growth (real GDP) Short run view Aggregate demand primarily affects economic growth (real GDP) Inflexible prices
Which of the following is true according to the Neo-Classical macroeconomic model? A) In the long-run equilibrium, the unemployment rate is zero percent. B) Government interventions are required and helpful. C) A capitalist economy automatically adjusts to the full-employment equilibrium in the long-run. D) In the long-run equilibrium, aggregate demand is greater than aggregate supply...
Which of the following describes the use of Keynesian macroeconomic policy to resolve an inflationary gap problem in the economy? a) Unemployment, resulting from the short-run product markets equilibrium being below Long-run Aggregate Supply (LRAS), causes wages to decline, which increases short-run Aggregate Supply (AS), until long-run equilibrium is attained at full employment level of income and a lower price level. b) Government spending is increased, increasing Aggregate Demand (AD) to a level sufficient to attain long-run equilibrium at full employment level of income and a higher price level. c) In attempting to produce beyond the economy's natural level of GDP, producers bid up wages and prices of other resources, causing the short-run Aggregate Supply (AS) to decrease to the point where long-run equilibrium is restored. d) Taxes are increased reducing Aggregate Demand (AD) to a level consistent with full employment.
According to the Keynesian model, demand shocks affect output in the short run because: nominal wages are sticky. employment can be adjusted quickly. real wages do not change as inflation changes. None of the above.
How were the Keynesian, Monetarist and New Classical theories of the economy synthesized to develop the New Keynesian Economics?
Select the answer that best describes Keynesian and Classical economic theories. Classical theory is useful for describing the long-run movement between economic equilibria while Keynesian theory is helpful to describe short-run movements in the price level. Classical theory suggests that the economy will quickly move between equilibria, eliminating the need for government intervention. Keynesian theory suggests that fiscal and/or monetary policy can be useful in counteracting changes in equilibria resulting from sticky prices and sticky wages. Keynesian theory suggests that tax cuts or direct government expenditure are ways to stimulate the economy while Classical theory suggests that only tax cuts provide useful stimulus. Classical and Keynesian theories both advocate for direct government intervention during recessions.
A Keynesian economy is described by the following equations. Consumption Cd = 250 + 0.5(Y - T) - 250r Investment Id = 250 - 250r Government purchases G = 300 Government taxes T = 300 Real money demand L = 0.5Y - 500r + πe Money supply M = 3000 Full-employment output Y = 1250 Expected inflation πe = 0 (HINT a: The expected rate of inflation is assumed to equal zero so that money demand depends directly on the real interest rate, which equals the nominal interest rate. Domestic Savings, Sd =Y - C - G. In equilibrium set domestic savings equal to domestic investment, so Sd = Id) Calculate the values of the real interest rate (r), consumption (Cd), and investment (Id) for the economy in general equilibrium.
According to Keynesian Theory, stabilization policy (i.e. Aggregate Demand Management) should not be used to smooth out the business cycle. This is because there are 3 key problems with using ANY policy to stabilize the economy. Briefly discuss 2 of these problems below. Provide complete statements (i.e. in paragraph forms), do not list ideas.
Consider the AD-AS model discussed during the lectures. Assume that the aggregate demand curve is given by Y = 8 - 0.5π, that the long run aggregate supply curve is given by Yp = 7, that the short run aggregate supply curve is given by π = π_expect + 0.3(Y - Yp), and that the monetary rule is given by r = 1 + 0.3π. b) Suppose the economy is in equilibrium at the potential level of output, with inflation expectations equal to actual inflation, which equals 2%. A financial crisis hits the economy. Use the model to interpret what happens in the short run and in the long run if the central bank does not intervene exogenously with an expansionary monetary policy.
Which of the following supports the argument for hands-off policy? A. Monetary policy does not impact the economy. B. Fiscal policy does not impact the economy. C. Fine-tuning is not compatible with our design capabilities. D. The economy has been fairly stable since World War II.
The natural rate of unemployment (NRU) is the long-run equilibrium rate of unemployment within the monetarist macroeconomic model. The NRU depends on which of the following? (a) The structure of the economy and in particular the level of aggregate supply; (b) The structure of the economy and in particular the level of aggregate demand; (c) The structure of the economy and in particular the institutions within it; (d) The structure of the economy and in particular the price of oil.
Compare and contrast the Keynesian approach to the management of the level of aggregate demand to the Monetarist (classical) macroeconomic models.