Macroeconomics (Book Only)
12th Edition
ISBN: 9781285738314
Author: Roger A. Arnold
Publisher: Cengage Learning
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Question
Chapter 10, Problem 1VQP
To determine
Illustrate the Keynesian economist explanation of the recessionary gap.
Expert Solution & Answer
Explanation of Solution
If the economy is in the recessionary gap, then the level of output is less than the full employment level and there is surplus in the labor market. If the wages are flexible, then the short run
The Keynesian economists consider that the wages are strictly downward. The short run aggregate supply (SRAS) curve will not shift rightward and therefore, the economy will not remove itself from a recessionary gap.
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Chapter 10 Solutions
Macroeconomics (Book Only)
Ch. 10.1 - Prob. 1STCh. 10.1 - Prob. 2STCh. 10.1 - Prob. 3STCh. 10.2 - Prob. 1STCh. 10.2 - Prob. 2STCh. 10.2 - Prob. 3STCh. 10.3 - Prob. 1STCh. 10.3 - Prob. 2STCh. 10.3 - Prob. 3STCh. 10.4 - Prob. 1ST
Ch. 10.4 - Prob. 2STCh. 10 - Prob. 1VQPCh. 10 - Prob. 2VQPCh. 10 - Prob. 3VQPCh. 10 - Prob. 4VQPCh. 10 - Prob. 5VQPCh. 10 - Prob. 1QPCh. 10 - Prob. 2QPCh. 10 - Prob. 3QPCh. 10 - Prob. 4QPCh. 10 - Prob. 5QPCh. 10 - Prob. 6QPCh. 10 - Prob. 7QPCh. 10 - Prob. 8QPCh. 10 - Prob. 9QPCh. 10 - Prob. 10QPCh. 10 - Prob. 11QPCh. 10 - Prob. 12QPCh. 10 - Prob. 13QPCh. 10 - Prob. 14QPCh. 10 - Prob. 15QPCh. 10 - Prob. 16QPCh. 10 - Prob. 17QPCh. 10 - Prob. 18QPCh. 10 - Prob. 19QPCh. 10 - Prob. 20QPCh. 10 - Explain how to derive a total expenditures (TE)...Ch. 10 - Prob. 22QPCh. 10 - Prob. 23QPCh. 10 - Prob. 24QPCh. 10 - Prob. 25QPCh. 10 - Prob. 1WNGCh. 10 - Prob. 2WNGCh. 10 - Prob. 3WNGCh. 10 - Prob. 4WNGCh. 10 - Prob. 5WNGCh. 10 - Prob. 6WNGCh. 10 - Prob. 7WNGCh. 10 - Prob. 8WNG
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Similar questions
- Explain why is it possible that the economy will not self-correct out of a recessionary gap?arrow_forwardAccording to the Keynesian economists, who reject the self-regulating economy, how does the economy adjust to eliminate a recessionary gap? (Explain in your own words. Use a graph to explain your answer if necessary)arrow_forwardDoes the graph above reflect a Classical Model or a Keynesian Model? How do you know? What is happening in this economy in the short run?arrow_forward
- what is the impact of a contractionary policy on the U.S. economy from a new keynesian point of view? Show the impact using a graph.arrow_forward10 . In the “complete Keynesian model”, the investment functions was I = I0 - f(i). An analyst now proposes the following investment function: I = I0 - f(i) + qY, where “q” is a parameter and Y is national income = GDP. Provide two different arguments, i.e. explanations as to why this investment function makes sense. The focus is on the new term, qY (q times Y), in the function.arrow_forwardSuppose most business executives expect a slowdown in the economy (slower sales growth for their firm). How might that affect the economy?arrow_forward
- If the economy is operating in the Keynesian zone of the SRAS curve and aggregate demand falls,what is likely to happen to real GDP?arrow_forwardIn the simple Keynesian model, if aggregate expenditure is less than GDP, output will a)decline as firms increase their prices to stop the buildup of inventories b)increase as firms increase production to try to stop depletion of inventories c)remain unchanged indefinitely unless government takes action d)increase as firms cut their prices to try to stop depletion of inventories e)decline as firms cut production to stop the buildup of inventoriesarrow_forwardWhat role do inventories play in the equilibrating process in the simple Keynesian model (as described in the TE-TP framework)?arrow_forward
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