Economics: Private and Public Choice (MindTap Course List)
16th Edition
ISBN: 9781305506725
Author: James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher: Cengage Learning
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Chapter 11, Problem 10CQ
To determine
Keynesians’ view on sending checks to householders and its effects in the economy.
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The Keynesian theory was first introduced in 1936. Why was it presented at that time, and what policy implications did it have?
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During the recession of 2008, Did the US Government take a page of the Keynesian Macro theory to help move the country out of recession? What did they create? Did it work?
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Economics: Private and Public Choice (MindTap Course List)
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- In the Keynesian framework, which of the following events might cause a recession? Group of answer choices none of the above tax rates fall interest rates fall foreign lenders flood the US market to make home loansarrow_forwardNow think about a major recession, like the one that occurred in 1982. (Hint: a major recession could be caused by a large shift to the left in the AD curve.) Why would a Keynesian policy make more sense in response to a major recession like the one that occurred in 1982? What would be the cost of following a neoclassical policy then?arrow_forwardFriedman and Schwartz, Keynes, Hayek and Robins, Schumpeter, Hansen and Wilson, and Temin emphasize different forces in terms of the causes of the depression and it’s severity. Contrast the Keynesian view with two of the others that we have discussed.arrow_forward
- What is the philosophical, economic essence of Keynesian doctrine or “Keynesianism” that emerged from the experience and attempted explanations of the Great Depression ? What would all Keynesians believe, in order to be “Keynesian?”arrow_forwardThe AD/AS model is static. It shows a snapshot of the economy at a given point in time. Both economic growth and inflation are dynamic phenomena. Suppose economic growth is 3% per year and aggregate demand is growing at the same rate. What does the AD/AS model say the inflation rate should be?arrow_forwardWhat are some limitations of the Classical Theory that Keynesian Theory learnt from and tried to fix?arrow_forward
- what is the impact of a contractionary policy on the U.S. economy from a new keynesian point of view? Show the impact using a graph.arrow_forwardOne practical limitation with Keynesian economics is the challenge of implementing active economic policy quickly. How severe is this problem and why? What is one example?arrow_forwardWhat was Keynes’s solution to the Depression?arrow_forward
- In the Keynesian framework, which of the following events might cause a reaction ? a) A large increase in the price of the homes people own b) Rapid growth in the economy of a major trading partner c) The development of a major new technology offers profitable opportunities for business d) The interest rate rises e) The good imported from a major trading partner becomes much less expensivearrow_forwardA friend of yours (who has not taken macroeconomics) has just read that Keynesian theory represented a direct attack on Classical theory. They don't understand either theory and knows you (having just taken macroeconomics) are well-versed in both. They ask you to explain the basic differences between how Keynes and the Classics understood the business cycle and their respective policy prescriptions. Your answer should probably include: a) a basic explanation of what full-employment GDP means and how it relates to the stability condition S=| (or, equivalently, leakages = injections); b) an explanation of why the Classicals believed that any movement away from full-employment GDP would be quickly fixed/reversed; c) an explanation of why Keynes thought the Classicals* "auto-correcting" story was problematic, i.e., a detailed explanation of Keynes' multiplier concept (how did Keynes believe a recession would unfold (step-by-step) and why did he believe it could persist); d) an explanation…arrow_forwardIn the Keynesian model (that is, the short run), what causes recessions?arrow_forward
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