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- Review the fundamental microeconomic assumptions on the consumers’ behaviour within the neoclassical model. What are the main strengths and the main limitations of those assumptions? Discuss with theoretical and applied evidence.According to the lectures, which of the following ideas are representative of (neo)classical (orthodox) theory, which are representative of (post)Keynesian (heterodox) theory, and which are shared by both theories? 1. Capitalist economies tend to full employment, at least in the long run = 2. Output, income, and employment fall when money saved exceeds intended investment, until savings equals investment = 3. Demand, particularly intended investment, drives supply = 4. Capitalist economies will normally fail to reach full employment due to insufficient aggregate demand = 5. Interest rates fall when money saved exceeds the demand for those funds for investment, until savings equals investment =b) What differences emerge between Keynesian and Classical economists regarding understanding the business cycle and how the economy should best be managed? c) Present an argument where you express support for either a Keynesian approach OR a Classical approach. You should make a case in arguing for only ONE of these two different approaches and use real-world example.
- Contrast the Keynesian and neoclassical approaches to responding to a recession. Assess how modern macroeconomists might blend elements of each perspective in their economic modeling.According to the lectures, which of the following ideas are representative of (neo)classical (orthodox) theory, which are representative of (post)Keynesian (heterodox) theory, and which are shared by both theories? In equilibrium, aggregate demand (total planned spending) -- must equal output and income Demand, particularly intended investment, drives supply Supply creates its own demand Capitalist economies tend to full employment, at least in -- the long run Interest rates fall when money saved exceeds the demand for those funds for investment, until savings equals investment Saving is a leakage out of, and investment is an injection - into, the spending flow 1. (neo)classical Investment and savings are primarily functions of the rate -- of interest 2. (post)Keynesian 3. Both The paradox of thrift "In the long run, we're all dead" Capitalist economies will normally fail to reach full - employment due to insufficient aggregate demand Savings equals investment in equilibrium (ignoring…a) Consider the Keynesian models of Business Cycles. Suppose you see a recession (drop in output) that is accompanied by a decline in inflation. What types of shocks could have possibly triggered such a recession? b) Consider the Keynesian models of Business Cycles. Suppose you see a recession (drop in output) that is accompanied by an increase in inflation. What types of shocks could have possibly triggered such a recession?
- Given that the Mundell-Fleming model is one of the innovations of neoclassical economics, do the policy recommendations remain timely and relevant?1. Explain what is meant by ‘macroeconomics’ and why some economists think that it is different to standard neoclassical economics.Modern economic models sometimes require strong assumptions. What do you think are some of the trade-offs between a more rigorous, logically cohesive model with strong assumptions but clear inferences and a description of problems followed by a verbal discussion of possible implications? The o-ring and big push models are based on which of these approaches?
- Use the conversation part to answer (B) part. ALEX: Hi, Becky. I’m intrigued to see how macroeconomics allows us to explain recent economic events such as the Great Recession that affected so many people. But there’s one thing I don’t understand. Was the collapse of the housing bubble the only cause of the recession, or were there other factors as well? BECKY: Hi, Alex. I agree that macroeconomic theory offers an entirely new perspective on how the economy works. To answer your question, the crash of the housing market was a major factor but not the only cause of the Great Recession. The professor mentioned that the __________ (options: financial, fiscal, government) system deteriorated as well, an event that deepened the economic downturn even further. ALEX: I see. So the bursting of the housing bubble caused the initial decline in aggregate demand. Then the financial crisis caused aggregate demand to decline even more. Could you also help me understand how to use the aggregate demand…Consider the standard neoclassical growth model where there are two types of individuals: capitalists and workers. Capitalists own the initial wealth and do not work. Workers do not save. Technology is the standard neoclassical type. (a) Define a competitive equilibrium. (b) Use the first order conditions of the two different types of individuals in order to construct the appropriate implementability conditions. (c) Set up the Ramsey problem and characterize it. How would the standard optimal fiscal policy analysis change?Macroeconomics: Regarding Neoclassical Economic Theory: Question: What interventions if any would a neoclassical economist advocate for in a severe downturn. Can You Explain Your Answer Please. Thanks