MACROECONOMICS FOR TODAY
10th Edition
ISBN: 9781337613057
Author: Tucker
Publisher: CENGAGE L
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Chapter 16, Problem 12SQP
To determine
Shape of the
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Why is the shape of the aggregate supply curve important to the Keynesian-monetarist controversy? (Hint: Review Exhibit 6 of Chapter 26 in the chapter on aggregate demand and supply.
Which of the following is NOT an example of monetary policy to restrict aggregate demand?
a)Raising interest rates
b)Reducing money supply
c)Rationing credit
d)Increasing income tax
The following events have occurred in the history of the United States:
A deep recession hits the world economy.
The world oil price rises sharply.
S. businesses expect future profits to fall.
Describe what a classical macroeconomist, a Keynesian, and a monetarist would want to do in response to each of the events listed above.
Chapter 16 Solutions
MACROECONOMICS FOR TODAY
Ch. 16.3 - Prob. 1.1YTECh. 16.3 - Prob. 2.1YTECh. 16.3 - Prob. 2.2YTECh. 16.A - Prob. 1SQPCh. 16.A - Prob. 2SQPCh. 16.A - Prob. 3SQPCh. 16.A - Prob. 4SQPCh. 16.A - Prob. 1SQCh. 16.A - Prob. 2SQCh. 16.A - Prob. 3SQ
Ch. 16.A - Prob. 4SQCh. 16.A - Prob. 5SQCh. 16.A - Prob. 6SQCh. 16.A - Prob. 7SQCh. 16.A - Prob. 8SQCh. 16.A - Prob. 9SQCh. 16.A - Prob. 10SQCh. 16.A - Prob. 11SQCh. 16.A - Prob. 12SQCh. 16.A - Prob. 13SQCh. 16.A - Prob. 14SQCh. 16.A - Prob. 15SQCh. 16 - Prob. 1SQPCh. 16 - Prob. 2SQPCh. 16 - Prob. 3SQPCh. 16 - Prob. 4SQPCh. 16 - Prob. 5SQPCh. 16 - Prob. 6SQPCh. 16 - Prob. 7SQPCh. 16 - Prob. 8SQPCh. 16 - Prob. 9SQPCh. 16 - Prob. 10SQPCh. 16 - Prob. 11SQPCh. 16 - Prob. 12SQPCh. 16 - Prob. 1SQCh. 16 - Prob. 2SQCh. 16 - Prob. 3SQCh. 16 - Prob. 4SQCh. 16 - Prob. 5SQCh. 16 - Prob. 6SQCh. 16 - Prob. 7SQCh. 16 - Prob. 8SQCh. 16 - Prob. 9SQCh. 16 - Prob. 10SQCh. 16 - Prob. 11SQCh. 16 - Prob. 12SQCh. 16 - Prob. 13SQCh. 16 - Prob. 14SQCh. 16 - Prob. 15SQCh. 16 - Prob. 16SQCh. 16 - Prob. 17SQCh. 16 - Prob. 18SQCh. 16 - Prob. 19SQCh. 16 - Prob. 20SQ
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- Identify each item as Fiscal or Monetary Policy, or Botharrow_forwardUsing the monetarist/new classical model and the Keynesian model, discuss the view that increases in aggregate demand will inevitably be inflationary.arrow_forwardThe following events have occurred in the history of the United States: A deep recession hits the world economy. The world oil price rises sharply. U.S. businesses expect future profits to fall. Describe what a classical macroeconomist, a Keynesian, and a monetarist would want to do in response to each of the events listed above.arrow_forward
- Suppose that government spending is increased at the same time when an autonomous monetary policy tightening occurs. What will happen to the position of the aggregate demand curve?arrow_forwardWhich of the following best describes the conduct of monetary policy? The Fed changes interest rates so as to affect aggregate demand. The Fed changes interest rates in order to affect the money supply. The Fed changes tax rates so as to affect aggregate demand. The Fed changes the money supply in order to affect the level of interest rates.arrow_forwardCompare and contrast the Keynesian approach to the management of the level of aggregate demand to the Monetarist (classical) macroeconomic models.arrow_forward
- Use the following information for this problem: Goods Market: Asset Market: C = 3+0.5(Y-T) MS = 25/P; assume that the P=1 initially I = 12-50r MD = Y - 50r T = 10 G = 10 Suppose that when the economy is in the Short Run equilibrium (hand draw a new graph starting at the Short Run) the Federal Reserve wants to conduct a stabilization policy. What is the policy they would use called? Show graphically how they would stabilize.arrow_forwardIn one or two sentences, explain why Keynesian economists believe that increasing the money supply will be effective at increasing aggregate demand in the short run.arrow_forwardIn one version of the monetarist model, we said that the velocity of money, V, is treated as constant (as an approximation of reality). Also, recall that we said monetarists assume that the short-run Aggregate Supply curve is upward sloping (i.e., real GDP, Q, is not fixed in the short run), but the Long-run Aggregate Supply curve is vertical (as in our self-regulating model). Consider the equation of exchange, MV≡PQ An increase in government spending would Group of answer choices A) cause a recession. B) increase real GDP in the long run, but not the short run. C) cause inflation in the short run. D) not increase real GDP in the short or long run because there would be complete crowding out. E) increase real GDP in the short run, but not the long run.arrow_forward
- In one version of the monetarist model, we said that the velocity of money, V, is treated as constant (as an approximation of reality). Also, recall that we said monetarists assume that the short-run Aggregate Supply curve is upward sloping (i.e., real GDP, Q, is not fixed in the short run), but the Long-run Aggregate Supply curve is vertical (as in our self-regulating model). Consider the equation of exchange, MV≡PQ (with V treated as fixed). Under the assumptions in this question, Group of answer choices A) none of the other options. B) if the money supply (M) were to increase by x%, the aggregate price level (P) would increase by x%. C) if the money supply (M) were to increase by x%, real GDP would increase by x%. D) if the money supply (M) were to increase by x%, the aggregate price level (P) would increase by more than x%. E) if the money supply (M) were to increase by x%, nominal GDP would increase by x%.arrow_forwardWhen a central bank has driven down short-term nominal interest rates to nearly zero, the monetary policy can do nothing more to stimulate the economy. True or false? Explain.arrow_forwardIn the monetarist version of the AD-AS framework, a decrease in velocity of money produces a ________________ shift of the _________ curve. Group of answer choices rightward; Ms (Money Supply) leftward; AD (Aggregate Demand) rightward; AS (Aggregate Supply) rightward; AD (Aggregate Demand)arrow_forward
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