xplain fully how the AS/AD model is an update of the Keynesian model. Provide a graph of the equilibrium income in the Keynesian model, and compare it with a graph of the equilibrium income in the AS/AD model. Why are negative supply shocks much more harmful to an economy compared with negative demand shocks? Compare the policies which can be used to address negative demand shocks with policies to address negative supply shocks.

Q: In the following table, indicate the shift in aggregate supply (AS) or aggregate demand (AD)-and the…

A: A framework called the AD-AS model is used in economics. It is used to examine the effects of…

Q: Assume that initially everyone expected the price level to stay the same when the Federal Reserve…

A: here, AS is Aggregate supply AD is Aggregate demand

Q: Why do temporary negative supply shocks pose adilemma for policymakers?

A: Dilemma refers to the condition when an individual faces difficulty in making an efficient decision…

Q: By using appropriate diagrams, discuss the role of the monetary and fiscal policies in the New…

A: The sticky-price model of the upward sloping short-run AS (aggregate supply) curve is based on the…

Q: a) In the AS/AD macro model, starting at potential GDP explain what happens in the short run when…

A: Since you have posted a question with multiple sub-parts, we will solve the first three sub-parts…

Q: With the theoretical prediction of PIH mind, explain how Friedman sought to reconcile the evidence…

A: The permanent income hypothesis is a consumer spending theory that states that people will spend at…

Q: In theory, how does the Keynesian as well as the Neoclassical perspectives work in manipulating…

A: Keynesians contend that long-term fiscal and monetary policy should be focused on boosting potential…

Q: Explain the concept of “Divine Coincidence” and clearly state the cases where it holds and where it…

A: The New Keynesian model is a monetary framework that has been created inside macroeconomics as an…

Q: You are the chair of the Federal Reserve when, because of sudden loss of consumer confidence, there…

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Q: What is, according to Keynes, the role of expectations in stabilizing or destabilizing the aggregate…

A: Macroeconomics is a part of economics that deals with production, decision and allocation concerning…

Q: Which of the following government policies would be supported by Keynesian macroeconomic…

A: * ANSWER :-  * The OPTION C (stimulating aggregate demand to reduce unemployment) is correct answer.…

Q: Keynesian macroeconomic model is characterized with the following equations: Y = C + I + G Goods…

A: ISLM model refers to the two-dimensional macroeconomic tools that show there is a relationship…

Q: Consider a standard AD-AS model. The economy is affected by the following sequence of events. In…

A: The aggregate demand (AD) refers to the summation of all the individual demands for different goods…

Q: in 2012 japan prime minister shinzo Abi decided to increase money supply from 120 to 240 trillion in…

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Q: Compare and contrast the ideas of Keynes and the policies based on his ideas with the ideas and…

A: The Keynes and Supply side economics are two distinct  economic theories. Both stress upon different…

Q: Apparently, Keynes assumed stable prices regardless of the level of government money creation. Was…

A: When talking about Keynesian economics, it can be said that this theory is primarily applicable…

Q: oes it make sense that wages would be sticky downwards but not upwards? Why or why not?

A: Wage is an installment typically finished by a business to a worker for administrations presented by…

Q: Draw and properly label AD-AS graphs or one graph to show recessionary and inflationary gaps. Then,…

A: A gap in GDP occurs when potential GDP is different from actual GDP. Actual GDP is that level of GDP…

Q: Suppose that productivity growth in Country X's economy has fallen to less than 1% per year. This…

A: A) the growth rate of long-term productivityIn the neoclassical model, long-term productivity growth…

Q: Why AD is never a constraint in the classical model?

A: Answer: The classical model assumes that supply creases its own demand (Say's law). So no matter how…

Q: Think about a minor recession, like the one that occurred in 1990. (Hint: a minor recession could be…

A: According to Keynesian macroeconomic theory, the best way to deal with a downturn is to expand…

Q: Use the AS/AD model to determine how each of these events will affect the economy. Determine if the…

A: The objective of the question is to determine the position of the economy with respect to the…

Q: a. What effect does this likely have on the economy? The price level falls and output rises. The…

A: Moore's Law is an observation and prediction made by Gordon Moore, co-founder of Intel, in 1965. It…

Q: The graph below shows the AD-AS diagram for Spain. Suppose that the economy is initially in long-run…

A: Aggregate Demand refers to the sum total of all the demand for goods and services within an economy…

Q: Australian authorities faced significant health and economic policy challenges during the COVID- 19…

A: The Keynesian model is an economic model that emphasizes the role of government intervention in…

Q: Keynes advocated the use of fiscal and monetary policy to stabilize an economy? When are the effects…

A: Classical economists believed in laissez-faire policy which means that there should be no government…

Q: The mainstream view of macroeconomic instability emphasizes sticky prices. To answer the following…

A: Macroeconomics: It refers to the policies of the government in which the economy as a whole is…

Q: What is the philosophical, economic essence of Keynesian doctrine or “Keynesianism” that emerged…

A: The philosophy of Keynesian doctrine or Keynesianism on the great depression was that there exist…

Q: The Keynesian model believes that supply creates its own demand. O True O False

A: The statement is false.

Q: How does the self-correcting mechanism act to pull the economy out of a recession?

A: The measure that depicts the quantity of goods and services being demanded at various levels of…

Q: According to mainstream economists, what is the usual cause of macroeconomic instability? What role…

A: The Economic instability means shock to an economy.  Instability leads to more unemployment, low…

Q: Use the dynamic AD-AS model to describe the impact of the crisis on the economy. Be sure to comment…

A: Economic crisis: It refers to the quick and sudden change in the economy which results in the…

Q: Use brief language and diagrams (AD-AS model) to discuss the difference between Keynesian view and…

A:

Q: Fully develop (mathematically and graphically) the Keynesian Cross (Expenditures=Output) model. Be…

A: Keynesian Cross depicts the aggregate expenditures in an economy or the demand side of economy which…

Q: Take a look again at Figure 1 (originally from the page in the text titled "Neoclassical and…

A: The difference between real GDP and potential GDP, when both are measured in real terms, is known as…

Q: Consider a standard AD-AS model. An increase in the interest sensitivity of consumption and/or…

A: In an economy, the AD-AS model is used to make an analysis of the market condition, and AD-AS curves…

Q: Let's consider the unlikely (I hope!!!) case of a crash in housing and stock prices later on in…

A: The economy is said to be in its long-run equilibrium position in the AD/SRAS/LRAS model at the…

Q: Egypt authorities faced significant health and economic policy challenges during the COVID19…

A: (i) A fall in confidence can lead to a decrease in consumption and investment expenditure. Consumers…

Q: Do you believe that the Hayek’s classical AD-AS model explain the factors that cause changes…

A: 1.2 The Hayek’s classical model illustrates the aggregate supply curve as a vertical straight line…

Q: Explain why a supply shocks is most of the time believed to be temporary? And does not result in…

A: A supply usually shock occurs when the supply of a commodity or service suddenly increases or…

Q: Part 4:What happens in the short-run when AD falls from AD to AD1 to the price level and output?…

A: Short-run(SR) aggregate supply(AS) curve is usually upward sloping because for the higher prices(P)…

Q: Discuss the similarities and differences between the Keynesian and AD/AS models.

A: Economics as a subject was introduced because resources were scarce and the high population of the…

Q: Show and explain graphically the AD/AS model in neoclassical economic and macroeconomic.

A: The neoclassical approach is an economic theory that emphasizes the role of markets and the behavior…