Principles of Economics 2e
2nd Edition
ISBN: 9781947172364
Author: Steven A. Greenlaw; David Shapiro
Publisher: OpenStax
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Textbook Question
Chapter 26, Problem 19CTQ
Economists from all theoretical persuasions criticized the American Recovery and Reinvestment Act. The “Stimulus Package” was arguably a Keynesian measure so why would a Keynesian economist be critical of it? Why would neoclassical economists be critical?
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Chapter 26 Solutions
Principles of Economics 2e
Ch. 26 - Do rational expectations tend to look back at past...Ch. 26 - Legislation proposes that the government should...Ch. 26 - Would it make sense to argue that rational...Ch. 26 - Summarize the Keynesian and Neoclassical models.Ch. 26 - Does neoclassical economics focus on the long term...Ch. 26 - Does neoclassical economics view prices and wages...Ch. 26 - What shape is the long-nm aggregate supply curve?...Ch. 26 - What is the difference between rational...Ch. 26 - A neoclassical economist and a Keynesian economist...Ch. 26 - Do neoclassical economists tend to focus more on...
Ch. 26 - Do neoclassical economists tend to focus more on...Ch. 26 - Do neoclassical economists see a value in...Ch. 26 - If aggregate supply is vertical, what role does...Ch. 26 - What is the shape of the neoclassical long-run...Ch. 26 - When the economy is experiencing a recession, why...Ch. 26 - If the economy is suffering through a rampant...Ch. 26 - If most people have rational expectations, how...Ch. 26 - Explain why the neoclassical economists believe...Ch. 26 - Economists from all theoretical persuasions...Ch. 26 - Is it a logical contradiction to be a neoclassical...Ch. 26 - Use Table 26.3 to answer the following questions....
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- Summarize the Keynesian and Neoclassical models.arrow_forwardWould it make sense to argue that rational expectations economics is an extreme version of neoclassicaleconomics? Explain.arrow_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_forward
- According to Keynesian economics, what is the suggested approach to address a recession? A) Reduce government spending and taxes. B) Increase government spending to stimulate demand. C) Maintain a hands-off approach and let markets self-correct. D) Raise interest rates to control inflation.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_forwardThe two principles that make a person a “Keynesian” consist of the ideology that the private economy may not reach full employment and that government spending can spur the economy into filling the gap. Give two examples that may be applied to the real world.arrow_forward
- Would it be plausible to claim that the theory of rational expectations is a distorted form of neoclassical economics? Explain.arrow_forwardExplain why classical assumptions are not realistic?arrow_forwardHow were the Keynesian, Monetarist and New Classical theories of the economy synthesized to develop the New Keynesian Economics?arrow_forward
- Does neoclassical economics focus on the long term or the short term? Explain your answer.arrow_forwardWhat would a Keynesian likely recommend in response to a recession? What would a neoclassical likely recommend? Why would a Keynesian policy response not make much sense in response to a minor recession like the one that occurred in 1990? What would be the cost of letting the economy adjust by itself to a new long run equilibrium?arrow_forwardAccording to Keynesian Theory, stabilization policy (i.e. Aggregate Demand Management) should not be used to smooth out the business cycle. This is because there are 3 key problems with using ANY policy to stabilize the economy. Briefly discuss 2 of these problems below. Provide complete statements (i.e. in paragraph forms), do not list ideas.arrow_forward
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