With the theoretical prediction of PIH mind, explain how Friedman sought to reconcile the evidence about consumption from cross-sectional data with that from time-series macroeconomic data.

The Keynesian cross model is derived assuming that the interest rate is constant. True or False

No matter the macroeconomic conditions in an economy, a Keynesian economist always advocates for more government spending Group of answer choice   false true

Do you believe that the Hayek’s classical AD-AS model explain the factors that cause changes (shifts) in AS realistically? Why or why not?

Mexico is experiencing a Recession due to decrease demand.  Draw a correcly labeled AS/AD model representing where the economy is relative to the Natural Rate of Unemployment.

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Consider an AS AD diagram.  What would happen in the model if Energy prices increased? Group of answer choices a. AD shifts right and prices increase while real GDP increases b. AS shifts left and prices increase while real GDP decreases c. AS shifts right and prices decrease while real GDP increases d. AD shifts left and prices decreases while real GDP decreases

Consider the two-period Real Business Cycle (RBC) model without uncertainty presented in the lecture slides, but with one modification. Now assume that the instantaneous utility function for households takes the form:   where Ct is consumption at time t and (1- lt) is leisure time at time t. Given that the time endowment is normalized to 1, it follows that lt is hours worked at time t. Finally, Ɵ > 0, b > 0 and gamma > 0 are parameters. All households in the economy are assumed to be identical. We can therefore consider a 'representative household' (henceforth 'the household'). Set t = 1 for the present period and set t = 2 for the next period. For example, C1 is consumption in the present period and C2 is consumption in the next period. Remember, this is a two-period model so there are no time periods prior to t = 1 and there are no time periods after t = 2 Assume that the household begins and ends life with no accumulated wealth and that the real interest rate is r (where…

Draw and properly label an AD-AS model to show Keynesian, intermediate, and neoclassical zones. Then, briefly explain the levels of unemployment, inflation and real GDP in each zone, and also confirm whether all three goals of a macro economy are being achieved in each zone. 2. Draw and properly label the AD-AS graphs or one AD-AS graph to show recessionary and inflationary gaps. Then, discuss in detail how Keynesians suggest that recessionary and inflationary gaps be closed. 3. Draw and properly label AD-AS graphs or one AD-AS graph to show recessionary and inflationary gaps. Then, discuss in detail how neoclassicals suggest that recessionary and inflationary gaps be closed.

There may be no correct option, or more than one correct option..