Macroeconomics (Book Only)
Macroeconomics (Book Only)
12th Edition
ISBN: 9781285738314
Author: Roger A. Arnold
Publisher: Cengage Learning
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Chapter 10, Problem 2VQP

(a)

To determine

Illustrate the difference between Keynes and classical economist view of Say’s law.

 (b)

To determine

Explain the difference between the Keynes and classical view of investment.

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Attempts Average 2 1. Questioning the classical position Classical theorists maintain that Say's law holds in a money economy, arguing that funds saved must give rise to an equal amount of funds invested via variations in the interest rate. Keynes, however, argued that this is not necessarily the case. Which of the following best summarizes Keynes's critique of Say's law and its view of saving and investment? Check all that apply. Saving is inversely related to the interest rate. Investment is affected by many factors, some of which may be more influential than the interest rate. Saving is more responsive to changes in income than to changes in interest rates. Only investment is directly related to the interest rate.
How is Keynes position different from classical position with respect to wages, prices, and Say’s law?.
According to the neoclassical theory of distribution, a worker's real wage reflects her productivity. Let's use this insight to examine the incomes of two groups of workers: farmers and barbers. Let W, and W, be the nominal wages of farmers and barbers, P, and P, be the prices of food and haircuts, and MPL, and MPL, be the marginal productivity of farmers and barbers. a. Over the past century, the productivity of farmers (MPL) has risen substantially due to technological progress. According to the neoclassical theory, farmers' real wage (W/P) should have remained constant. increased. decreased. b. Over the past century, the productivity of barbers (MPL) has remained constant. According to the neoclassical theory, barbers' real wage (W/Pb) should have decreased. increased. Incorrect c. In parts a and b, real wages are measured as units of output per hour worked. the ratio of capital to labor. fluctuated randomly. Incorrect remained constant. fluctuated randomly. output per worker times…
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