Economics:
10th Edition
ISBN: 9781285859460
Author: BOYES, William
Publisher: Cengage Learning
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Question
Chapter 15, Problem 15E
To determine
To explain:
The statement that states if the government can help the economy in adjusting the equilibrium if the economy faces disequilibrium in the markets of labor and goods.
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If markets do not self-adjust, how can a decline in spending lead to a negative process that ruins an economy?
What usually causes a positive disequilibrium rate? What usually causes a negative disequilibrium rate?
Which policy would be better or effective for stabilizing an economy, monetary or fiscal?
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Similar questions
- Assume an economy is currently operating at point A. What key policy recommendations would you make for an economy like this one that is currently operating at point A? Justify why you believe this is appropriate policy.arrow_forwardin the keynesian model, an increase in government spending increasesarrow_forwardWhen the pandemic hit in the beginning of 2020, everything came to a halt. In a single month, 17 million Americans lost their job, and the gross domestic product (GDP), which is how economists measure the total value of a country's products and services, declined by US$2.15tn (£1.55tn). Economists were hopeful that across the world government spending and monetary policy would keep the economy from totally collapsing. During the first wave of lockdowns and stay-at-home orders since December 2019, it was clear that industries that relied on in-person customers - like travel and some retail - were going to struggle, while others would more easily adapt to the "new normal". Tech-heavy companies that delivered products or services to people's homes—like Amazon, Netflix, and Shopify—thrived. To improve the impact of the pandemic, most countries adopted an expansionary monetary policy. The change in the real interest rate influenced the goods market. Aggregate demand changed but there was no…arrow_forward
- According to the classical perspective (the one from the 19th century that I described at the beginning of my first lecture video), what kinds of things could cause recessions or other economic downturns?arrow_forwardSuppose you heard on the news that the three sectors of a closed economy are all spending more but, so far, there has been little to no change in the price level." What is the macroeconomics in this situation?arrow_forwardCould you please explain why the classical economists thought there was no inherent tendency in the market system to overproduction, recession, and depression.arrow_forward
- Keynes advocated the use of fiscal and monetary policy to stabilize an economy? When are the effects of these policies most beneficial? Select all that apply. Select one or more: In the short run When the economy is operating at full employment When the economy is operating significantly above full employment When the economy is operating significantly below full employment In the long runarrow_forward1) Explain what will happen in a nation that tries to solve a structural unemployment problem using expansionary monetary and fiscal policy. Draw one AD/ AS diagram, based on the Keynesian model, for what the nation hopes will happen. Then draw a second AD/ AS diagram, based on the neoclassical model, for what is more likely to happen (if drawing your answer is a challenge, please describe your answers in words and/or numbers). 2) Explain why the government might prefer to provide incentives to private firms to do investment or research and development, rather than simply doing the spending itself?arrow_forwardSuppose that an economy wants to boost available labor hours in order to increase aggregate supply. What is the best way to accomplish this?arrow_forward
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