Keynes believed that prices and wages were rigid or fixed until the economy reaches equilibrium full employment recession expansion

When 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.

An economy is at full employment. Which of the following can create an inflationary gap. Group of answer choices An increase in nominal wages. An increase in income taxes. An increase in government spending. A decrease in government spending.

Keynes believed that an increase in government expenditure during a recession would not result in significant inflation because he assumed that:     Answers: A.  Aggregate demand was vertical during a recession.   B.  The market would self-adjust to reach full employment.   C.  Aggregate supply was horizontal during a recession.   D.  The government would impose price ceilings during a recession.

Keynes broke with the classical and neo-classical economic perspective in regards to the belief of in self-correcting free markets. Discuss and explain Keyne's critique of Say's law and discuss why Keynes argued markets could reach equilibrium below the natural rate of unemployment.

If the intersection of AD and SRAS occurs at $21 trillion GDP but full employment GDP (LRAS) is at $22 trillion GDP, which of the following policy choices would help move the economy toward full employment? a) Lowering income taxes and payroll taxes for all employees. b) All of the choices would help increase AD and bring the economy closer to full employment. c) increasing the money supply to lower interest rates. d) Increases government spending on infrastructure. e) Sending out stimulus checks to everyone earning less than $100,000 per year.

Consider an economy currently in recession. Which is NOT a policy move that could assist the economy, as discussed in class? Raising the money supply Raising government spending Lowering bank reserves Lowering interest rates

Which of the following statements is true?   Question options:   Keynes believed wages and prices are often too flexible - falling wages can cause a recession.   Keynes believed an economy could get stuck in a recessionary gap.   Keynes advocated running government surpluses in times of recession.   Keynes believed the economy is self-regulating.   b and c

In the 1960s the U.S entered the Vietnam War,  and military expenditures (part of government expenditures) grew from an annual rate of $113 billion  to 138 billion. The economy was near full-employment and, therefore, given there was no offsetting tax increase, inflation pressures emerged. Assume the MPC is .75   A)  How did the increase in military expenditures affect AD?  B)  If in 1968 the AD Excess was $150 billion, what change in government expenditures would you have recommended?

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