Sub-part
A
The real
Concept Introduction:
Expansionary Gap: Expansionary Gap is the gap between actual output and potential output under full employment situation, when actual output is more than potential output.
Recessionary Gap: Recessionary Gap is the gap between actual output and potential output under full employment situation, when actual output is less than potential output.
Sub-part
B
The expansionary and recessionary Gap when the actual price level exceeds the expected price level.
Concept Introduction:
Expansionary Gap: Expansionary Gap is the gap between actual output and potential output under full employment situation, when actual output is more than potential output.
Recessionary Gap: Recessionary Gap is the gap between actual output and potential output under full employment situation, when actual output is less than potential output.
Sub-part
C
The real GDP and actual price level when the actual price level is lower than the expected price level.
Concept Introduction:
Expansionary Gap: Expansionary Gap is the gap between actual output and potential output under full employment situation, when actual output is more than potential output.
Recessionary Gap: Recessionary Gap is the gap between actual output and potential output under full employment situation, when actual output is less than potential output.
Sub-part
D
The expansionary and recessionary Gap when the actual price level is lower than the expected price level.
Concept Introduction:
Expansionary Gap: Expansionary Gap is the gap between actual output and potential output under full employment situation, when actual output is more than potential output.
Recessionary Gap: Recessionary Gap is the gap between actual output and potential output under full employment situation, when actual output is less than potential output.
Sub-part
E
The real GDP and actual price level when the actual price level equals the expected price level.
Concept Introduction:
Expansionary Gap: Expansionary Gap is the gap between actual output and potential output under full employment situation, when actual output is more than potential output.
Recessionary Gap: Recessionary Gap is the gap between actual output and potential output under full employment situation, when actual output is less than potential output.
Sub-part
F
The expansionary and recessionary Gap when the actual price level is equal to the expected price level.
Concept Introduction:
Expansionary Gap: Expansionary Gap is the gap between actual output and potential output under full employment situation, when actual output is more than potential output.
Recessionary Gap: Recessionary Gap is the gap between actual output and potential output under full employment situation, when actual output is less than potential output.
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Chapter 10 Solutions
ECON: MACRO4 (with CourseMate, 1 term (6 months) Printed Access Card) (New, Engaging Titles from 4LTR Press)
- Use the Feynman technique throughout. Assume that you’re explaining the answer to someone who doesn’t know the topic at all: 10. What is the mechanism or process that allows the expenditure multiplier to “work” in theKeynesian Cross Model? Explain and show both mathematically and graphically. What isthe underpinning assumption for the process to transpire?arrow_forwardUse the Feynman technique throughout. Assume that you’re explaining the answer to someone who doesn’t know the topic at all: 15. How is the Keynesian expenditure multiplier implicit in the Keynesian version of the AD/ASmodel? Explain and show mathematically. (note: this is a tough one)arrow_forwardUse the Feynman technique throughout. Assume that you’re explaining the answer to someone who doesn’t know the topic at all: 13. What would happen to the net exports function in Europe and the US respectively if thedemand for dollars rises worldwide? Explain why.arrow_forward
- 20. Given the mathematical model below, solve for the expenditure multiplier for a) government spending, G; and b) for consumer taxes, T. (medium difficulty) Y=C+I+G C=Co+b(Y-T) 1 = 10 T=To+tY G = Go+gYarrow_forwardUse the Feynman technique throughout. Assume that you’re explaining the answer to someone who doesn’t know the topic at all: 11. What exactly is a rectangular hyperbola and what relevance is it to classical economics?arrow_forwardUse the Feynman technique throughout. Assume that you’re explaining the answer to someone who doesn’t know the topic at all: 9. Explain the difference between absolute and comparative advantage in a family setting, i.e.using parents and children. What can we glean from knowing about comparative andabsolute advantages?arrow_forward
- Use the Feynman technique throughout. Assume that you’re explaining the answer to someone who doesn’t know the topic at all: 18. Explain why most economists believe it is absolutely necessary to allow free trade in aneconomy. Why is it harmful (under most circumstances) to have tariffs and trade barriers?arrow_forwardUse the Feynman technique throughout. Assume that you’re explaining the answer to someone who doesn’t know the topic at all: 19. How does the multiplier work in theory? How would you interpret Robert Barro’s empiricalfindings of a multiplier (note, not the MPC) of 0.8? What about Christine Romar’s finding ofa multiplier of 1.5?arrow_forwardUse the Feynman technique throughout. Assume that you’re explaining the answer to someone who doesn’t know the topic at all: 16. Explain the difference between absolute and comparative advantage. Be specific. How woulda country (or person) know that they had such an advantage?arrow_forward
- Use the Feynman technique throughout. Assume that you’reexplaining the answer to someone who doesn’t know the topic at all: 2. Give an overview of the equation of exchange (EoE) as used by Classical Theory. Now,carefully explain each variable in the EoE. What is meant by the “quantity theory of money”and how is it different from or the same as the equation of exchange?arrow_forwardUse the Feynman technique throughout. Assume that you’re explaining the answer to someone who doesn’t know the topic at all: 5. What is “Say’s Law” and how is it different from “Keynes’ Law”? How are these “laws”directly seen in the respective AD/AS models? Why is there such a huge disagreement aboutwhich “law” is correct?arrow_forward8. Read these recent quotes (taken from blogs) below and determine whether the sentiment inthe quote is Keynesian or Classical. Just write “Keynesian” or “Classical” in the space rightafter the Ph.D. economist’s name: a) “Market economies are not self-stabilizing and they do not quickly adjust to findthe socially optimal employment rate in the absence of active stabilizationpolicies.” – Economist Roger Farmer b) “The paradox of thrift purportedly shows that saving is bad and results in poverty.Well, it (saving) isn't that bad, because here we have the recognition that addedsaving results in lower interest rates and more investment.” – Economist BillWoolsey c) “In much of the world, there is insufficient demand to fully employ the valuableservices of available humans and machines. This characterization of the globaleconomy has been true for the past seven years. It seems likely to be true for yearsto come.” – Economist Nararyana Kocherlakota d) “The economic cost of unemployment…arrow_forward
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