Answered: ity Prefer

Business

Economics

ity Prefer

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Define the Keynesian Theory of Liquidity Preference.

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In this question, we assume Canada is a closed economy and is in its long-run equilibrium. TransCanada announced that they will not proceed with the East Energy pipeline in October 2017. According to the long-run classical model, what happens to the equilibrium levels of output, real interest rate, and investment in Canada after TransCanada made this announcement? What happens to the real wage in Canada? Explain your answer with the aid of TWOdiagrams - one for the loanable funds market and one for the labour market.
For each of the following situations, describe how (if at all) the IS, MP, and AD curves are affected. A decrease in financial frictions An increase in taxes and an autonomous easing of monetary policy An increase in the current inflation rate A decrease in autonomous consumption Firms become more optimistic about the future of the economy. The new Bank of Canada governor begins to care more about fighting inflation.
Why might a Keynesian Economist argue that a Federal Reserve policy alone will not get us out of a recession? ( explain in full response)
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In the Keynesian theory, money wages do not fall in response to a decrease in aggregate deman True False
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