ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN: 9780190931919
Author: NEWNAN
Publisher: Oxford University Press
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- new keynesian models assume that the business cycle fluctuations are driven by the aggregate demand components true or falsearrow_forwardConsider the AD-AS model below. The economy is in long-run equilibrium at point in period 1. Consider an increase in government spending. If the public has rational expectations, the economy will move to point If the public has adaptive expectations, the economy will move to point . In period 3 the AS will pass through point In the long run the AS will move to pointarrow_forwardWhen in macroeconomics an economy ‘overheats’ it is observed that aggregate demand exceeds national income at the full employment output level. Within a ‘Keynesian cross’ framework this overheating is described as which of the following: (a) A Goldilocks effect; (b) A hyperinflation; (c) A recessionary gap; (d) An inflationary gap Please illustrate the correct answer via a diagram.arrow_forward
- the August unemployment figures for Australia were surprisingly better than predicted (did not continue to increase) given the collapse that occurred in the economy due to COVID closures. (a) Use the static AD-AS model to explain the short run impact of the COVID closures on the economy and discuss the implications this has for unemployment. b) Comment on the limitations of the static AD-AS model in analysing the situation under COVID.arrow_forwardPlease help me with these two questionsarrow_forwardWhich of the following could shift the DAD (dynamic AD) curve to the right, all else equal? an increase in imports a higher real interest rate the Fed raising its target inflation rate a decrease in home purchasesarrow_forward
- Egypt authorities faced significant health and economic policy challenges during the COVID19 Pandemic, shutting down certain industries to protect public health. This shutdown resulted in almost 1 million jobs lost in April and May 2020, and a dramatic fall in consumers’ and firms’ confidence to spend and invest. Describe the effect that a fall in confidence had upon output in the Egypt economy using a Keynesian model of the macroeconomy. Ensure that your analysis includes the following:(i) the components of expenditure that are affected and why;(ii) the adjustment process associated with moving from an initial equilibrium (before the onset of the pandemic) to a new equilibrium (after the significant job losses), i.e. the mechanism that leads to a change in output (including a relevant diagram);(iii) an explanation of what the multiplier is and its role in explaining the fall in output; and(iv) a discussion of the policy actions that can restore aggregate demand to its initial level.arrow_forwardDo you believe that the Hayek’s classical AD-AS model explain the factors that cause changes (shifts) in AS realistically? Why or why not?arrow_forwardIn the Keynesian short-run macro model, a fall in the money supply will a)move the economy to the left along the aggregate expenditure line. b)shift the aggregate expenditure line downward. c)move the economy to the right along the aggregate expenditure line. d)shift the aggregate expenditure line upward. e)cause the aggregate expenditure line to rotate until it is flat.arrow_forward
- In a Keynesian framework, which of the following government policy choices offer a possible solution to recession? A tax increase on consumer income. A surge in military spending. A reduction in taxes for businesses that increase investment. A major increase in what the U.S. government spends on healthcare.arrow_forwardExplain why economic fluctuations happen according to Keynesians. Why do expansions happen, and recessions?arrow_forwardIn the Keynesian model, if there is a sudden rise in the aggregate demand curve, in the short run, it will cause a inflation b deflation c increase in output d a and carrow_forward
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