Keynesian view on savings.
Explanation of Solution
According to Keynesian economists, saving is a portion of the disposable income, which is left after meeting the consumption expenditure of a person. Keynes considered savings as a leakage of the economy. This is because Keynes argues that an increase in savings reduces the aggregate demand and thereby the
Want to see more full solutions like this?
Chapter ST4 Solutions
Microeconomics: Private and Public Choice (MindTap Course List)
- A neoclassical economist and a Keynesian economist are studying the economy of Vineland. It appears that Vineland is beginning to experience a mild recession with a decrease in aggregate demand. Which of these two economists would likely advocate that the government of Vineland take active measures to reverse this decline in aggregate demand? Why?arrow_forwardin the keynesian model, an increase in government spending increasesarrow_forwardWhat is the best approach to managing the economy, supply-side or demand-side economics? There are two schools of thought on how to managing the economy. The first is demand-side economics which also the Keynesian approach. This approach maintains that the demand for products and services drives the economy as such economic policies should focus on the aggregate demand curve. The other approach is called supply-side economics or more popularly referred to as Reaganomics. In this trickle-down approach, it is postulated that the production of goods and services is what drives the economy with the focus on the aggregate supply curve. Both fiscal and monetary policies have the potential to stimulate change in either the aggregated demand or the aggregate supply curves. In your initial post defend which approach should be used to (ensure to include in your subject line, which approach you are defending): Restore the economy that is in a recession. Identify the challenges that may be…arrow_forward
- In the Keynesian model, an increase in government spending would result in what?arrow_forwardHeilbroner’s (1999) chapter titles in the Worldly Philosophers give a snapshot of the context within each chapter. For instance, Heilbroner (1999) uses “The Heresies of John Maynard Keynes” and “The Contradictions of Joseph Schumpeter” as the titles for chapters 9 and 10, respectively. Based on these two chapters, discuss your understanding of Keynes’ most relevant “heresy” and Schumpeter’s most prominent “contradiction” in reference to their understanding of the business cycle and the role played by the capitalistarrow_forwardKeynes recommended that high unemployment should be remedied with a reduction in the money supply an increase in government expenditures an increase in taxes an increase in aggregate supplyarrow_forward
- If a Keynesian economist was offering policy advice to stimulate an economy, which of the following would apply? reduce unemployment benefits for 6 months let the economy work itself out, without any government action create a program that would fix and repair existing infrastructure and highways reduce licensing requirements for cosmetologists.arrow_forwardDerive and use the equilibrium in the goods market (Keynesian cross) to explain how a drop in consumption during the pandemic can lead to a decrease in production.arrow_forwardIn the AS/AD model, what are the main differences between the neoclassical perspective and the Keynesian perspective?arrow_forward
- What 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_forwardIn 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_forwardAssume an economy is currently operating at point A. What key policy recommendations would you make for an economy like this one that is currently operating at point A? Justify why you believe this is appropriate policy.arrow_forward
- Macroeconomics: Private and Public Choice (MindTa...EconomicsISBN:9781305506756Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. MacphersonPublisher:Cengage LearningEconomics: Private and Public Choice (MindTap Cou...EconomicsISBN:9781305506725Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. MacphersonPublisher:Cengage LearningMicroeconomics: Private and Public Choice (MindTa...EconomicsISBN:9781305506893Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. MacphersonPublisher:Cengage Learning
- Economics (MindTap Course List)EconomicsISBN:9781337617383Author:Roger A. ArnoldPublisher:Cengage Learning