What, according to Keynes, are the normal mechanisms for ensuring full- employment equilibrium given an increase in money demand? Discuss how each of them helps ensure full employment.

Q: increase in government spending on AE, IS, and AD

A: (i) Keynesian cross Increase in government spending increases aggregate expenditure (AE), which…

Q: Can you explain how expectations about future prices and incomes will affect consumption?

A: Consumption measures the total consumption spending by the households on different goods and…

Q: If interest rates on bank loans increase, then what will happen to the planned aggregate expenditure…

A: First, let us see how the interest-rate(r)s are linked to the planned aggregate expenditure function…

Q: From a Real Business Cycle (RBC) point of view, what is the impact of a contractionary policy on an…

A: According to Real business cycle theory the recovery of the cycle, the money demand will rise.…

Q: Why might it be important for policy makers to know which in zone of the SRAS curve the economy is?

A: SRAS (Short run aggregate supply): It refers which shows the positive relationship between the…

Q: Graphically illustrate and explain the increase in the interest rate on economic growth, inflation…

A: The AD/AS model is a macroeconomic framework that elucidates the connection between the price level…

Q: Based on the articles “Unemployment Claims Remain Historically High” and “US Consumer Spending Rose…

A: Unemployment refers to a situation where a person is willing to work but he/she doesn't get…

Q: What do you expect about the unemployment rate and inflation rate when we have the actual level of…

A: Actual level of output refers to the production of goods and services that are actually produced in…

Q: What was the most “nicompoopish” belief that Keynes ridiculed?

A: The J M Keynes is known as the father of Macroeconomics.  He is the biggest critique of classical…

Q: Which of the following statements about Keynes' contribution to macroeconomics is correct? A Keynes…

A: Option B is the correct answer   Keynes argued that depressions and recessions were almost always…

Q: Briefly describe the two conclusions that can be drawn from an overview of Say’s Law with its…

A: Economics is the social science that studies the production, distribution, and consumption of goods…

Q: Brief explanation on keynesian model and its diagram

A: Aggregate Demand: It refers to the total demand for goods and services in the economy within a given…

Q: The effect of Federal Reserve action (or inaction) in the AD-AS model The following graph shows an…

A: Disclaimer: I am allowed to answer only 3 questions. The diagram discusses the long-run and…

Q: What are some limitations of the Classical Theory that Keynesian Theory learnt from and tried to…

A: Keynesian Theory  Keynesian economics is a macroeconomic theory of the economy's income spent and…

Q: Consider this frugal ungoverned closed economy with a money market. C = 100 + 0.3Y Id = 700 – 200r…

A: Equilibrium will occur when IS equation equates with LM equation.

Q: Explain and show in detail whether the following sentence is correct or incorrect: "For Keynes, the…

A: During a downturn of the economy, sticky prices and wages would tend to be sticky which could in…

Q: There are several graphs that can be used to illustrate Keynes' distinction between macroeconomics…

A: The aggregate demand/aggregate supply (AD/AS) model is a fundamental framework in macroeconomics…

Q: Now that you have learned about the Keynesian perspective, what do you think about it?  In your…

A: Economics is the study of how the scarce resources of society are exploited. It is a social science…

Q: Assume that the economy has an inflationary gap. Explain how the economy will remove this gap…

A: An inflationary gap measures the difference between the actual production of the economy and the…

Q: Use the Keynesian model to explain the procyclical behavior of employment, money, inflation, and…

A: Economic analysis is the process of assessing data and trends in order to gain a better…

Q: On a diagram, demonstrate the effects of (I) a fall in investment and (II) a fall in the money…

A: The IS-LM framework is a macroeconomic model used to analyze the interaction between the real…

Q: 1. An article in the Wall Street Journal criticized the concept that an increase in government…

A: Marginal Propensity to Consume (MPC): MPC is the proportion of additional income that an individual…

Q: Explain fully how the equilibrium output, income, and employment are determined in the Keynesian…

A: The Keynesian model of macroeconomic equilibrium, often referred to as the Keynesian cross model, is…

Q: Using a diagram, illustrate the classical economists' solution to the inflationary gap.

A: The aggregate demand curve shows the negative relationship between the price level and the real GDP,…

Q: What does the concept of "crowding out" mean in macro economics according to John Maynard Keyn

A: In some cases, the government embraces an expansionary fiscal policy position and builds its…

Q: In this question, we assume Canada is a closed economy and is in its long-run equilibrium.…

A: Meaning of IS-LM Curve: The term IS-LM curve refers to the combination between market goods and…

Q: what are the perspectives of Keynes and Say regarding employment equilibrium and government…

A: Keynesian economics, developed by British economist John Maynard Keynes, and Say's Law, proposed by…

Q: According to the Keynesian economists, who reject the self-regulating economy, how does the economy…

A: Before the Keynesian economics came into existence, there was a classical believe that economy is…

Q: Suppose that with the liquidity facilities and asset purchase programs, the Bank of Canada increased…

A: Equilibrium is achieved at the point where IS and LM curve intersects each other. IS curve consists…

Q: Consider a Keynesian model of the economy with the following equations: C = 300 + 0.8Yd = 500 = 250…

A: The correct answer is given in the second step.

Q: How does the self-correcting mechanism act to pull the economy out of a recession?

A: The measure that depicts the quantity of goods and services being demanded at various levels of…

Q: What is the recessionary gap and inflationary gap? Explain the following concepts in detail. Use…

A: The cross-section of the economy’s AD and short-run AS curves computes the equilibrium real GDP and…

Q: Complete the following table by filling in the blanks. (Hint: In the table, Q Real GDP and QN…

A: Real GDP refers to the value of all goods and services  adjusted for price changes produces in the…

Q: Why is the Keynesian "Paradox of Thrift ” actually no paradox at all

A: The paradox of thrift: It expresses that people attempt to spare more during a financial downturn,…

Q: In this question, we assume Canada is a closed economy and is in its long-run equilibrium.…

A: The labor market equilibrium is brought about by the labor demand and labor supply in the market…

Q: How is Keynes position different from classical position with respect to wages, prices, and Say’s…

A: Classical Position on Wages, Prices and Say's law: The classical economist emphasized the…

Q: According to Keynes(Keynesian Macroeconomics), can the private sector always remove the economy from…

A: Keynesian school of economic thought contradicts the classical economic thought that economy always…

Q: Why might a Keynesian Economist argue that a Federal Reserve policy alone will not get us out of a…

A: Recession explains the market situation when the whole country is facing a downturn in aggregate…

Q: How does an increase in wealth effect the price level and real GDP?

A: An accumulation of valuable economic resources that may be valued in terms of physical products or…

Q: Illustrate, using a Keynesian Cross diagram,  the meaning of the term  ‘animal spirits’.

A: Animal spirits was a term coined by the famous British economist, John Maynard Keynes, to describe…

Q: Why did Keynes believe that the proper response to a period of recession was for the government to…

A: Keynes' macroeconomic view is referred to as the most practical view in economics as it deals with…