Keynes believes monetary policy O does not work in a depression but works in a recession O Works slowly and indirectly by first altering the rate of interest O both a and b

There are the three reasons why aggregate demand is downward slope: real wealth effect, interest rate effect, exchange rate effect. In a case scenario the market saw an increase in consumer spending when there is a boom in economy. Or the economic crisis makes the public bit shy to buy or consume any product. In the above two situations: the transfer payment does not make the part of government spending as the public will spend the money given as self-security and unemployment. Export situation gets worse as the foreigners are reluctant to buy expensive goods and the government will make some imports. The borrowing has become easy and loans are issued at a cheaper rate to buy car.   Following the equation: Y = C + I + G + NX will the below examples increase or decrease the aggregate demand in Pakistan? What will be the shift in position for below situations? Widespread fear of recession  The appreciation in the Pakistani Rupee rate  A boom in the stock market  An increase in transfer…

Use the Keynesian model to explain the procyclical behavior of Use the Keynesian model to explain the procyclical behavior of employment, money, inflation, and investment. Use the Keynesian model to explain the procyclical behavior of

A country's central bank is engaging in monetary contraction, with M going from M0=40 to M1=20. Its economy is as follows. Goods: slc = 3 MPC = 0.7 G = 10 T = 9 Before the policy, the goods market equilibrium is at Y0 = 54. Financial: I = 18-200r Before the policy, the loans market equilibrium is at r = 4.25% and I = 9.5 Money: M0 = 40 P0 = 2 M/P = 0.02 / (r - Y/5000)^2 and finally, Labor: w = MPL = 0.5 * 4.5 * 16^0.5 / L^0.5 w = EP / P0 * L^0.5 Where workers currently expect the price level of EP=2. How does the monetary contraction directly and immediately affect the goods market?   There are four endogenous variables that adjust in response to shock/policy: Y, I, r, P. The policy variable of interest is M. Therefore, let's approach our solution by first recognizing that all other letters are just constants and plug them in. For example: Y = 2 + 0.5(Y-6)+7+I becomes Y = 12 + 2*I First, express the goods market as expenditure being a linear function of investment I of the form: Y = a…

Combination Policy (a) Graph an AD/AS model with sticky wages and show graphically and ex- plain with words how the Australian government with the help of the Reserve Bank could increase government spending while keeping the economy at full employment without eausing changes in the price level. (b) If they pursue this policy, what happens to the amount of investment in the economy?

Considering how monetary policy affects the market, which of the following statements is most accurate? There is an indirect impact on aggregate demand by monetary policies. O There is more of an impact on consumption than investments by monetary policies. There is a direct impact on aggregate demand by monetary policies.

In the goods-and-services market actual inventories have started to rise above optimal inventories. What could have happened to autonomous money demand to bring this about? Explain and diagrammatically represent your answer. In doing so, be sure to explain and diagrammatically represent what happens to the rate of interest, investment, and Y. In explaining what happens to Y, be sure to fully explain the equilibrium process in the simple Keynesian model

50. Why is the Keynesian "Paradox of Thrift ” actually no paradox at all ?

In the classical model, equilibrium occurs at full employment, whereas in the Keynesian model, unemployment may exist in equilibrium. O True O False

did keynes believe that wages/prices were sticky in general-up and down? or just down?