Economics: Private and Public Choice
16th Edition
ISBN: 9781337642224
Author: James D. Gwartney; Richard L. Stroup; Russell S. Sobel
Publisher: Cengage Learning US
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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?
Chapter 11 Solutions
Economics: Private and Public Choice
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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_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_forwardWhat 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_forward
- The 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_forwardwhat 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_forward
- One 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_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_forwardLet us assume that the Bangladesh economy is in a recessionary gap right now with high unemployment and lower real GDP. According to classical macroeconomists, how will the economy of Bangladesh recover to natural real GDP (lower unemployment and higher real GDP)? Use the AD-AS model (diagram) in your answer.According to Keynesian macroeconomists, how can the economy of Bangladesh recover to natural real GDP (lower unemployment and higher real GDP)? Use the Keynesian AD-AS model (diagram)in your answerarrow_forward
- Keynes advocated the use of fiscal and monetary policy to stabilize an economy? When are the effects of these policies most beneficial? Select all that apply. Select one or more: In the short run When the economy is operating at full employment When the economy is operating significantly above full employment When the economy is operating significantly below full employment In the long runarrow_forwardNow that you have learned about the Keynesian perspective, what do you think about it? In your post, be sure to describe the Keynesian viewpoint and how they would use both fiscal and monetary policy to achieve their goals. Do you think Keynes was right? Why or why not?arrow_forwardConsider the Keynesian IS-LM model. How would each of the following scenarios affect output, employment, the real interest rate and the price level in the short run? In the long run? Wealth decreases .An increase in immigration causes an increase in labor supply. The capital stock increases.arrow_forward
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