Macroeconomics
13th Edition
ISBN: 9781337617444
Author: Roger A. Arnold
Publisher: Cengage
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Question
Chapter 16.5, Problem 2ST
To determine
The difference between new Keynesians and new classical economists.
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Chapter 16 Solutions
Macroeconomics
Ch. 16.2 - Prob. 1STCh. 16.2 - Prob. 2STCh. 16.2 - Prob. 3STCh. 16.3 - Prob. 1STCh. 16.3 - Prob. 2STCh. 16.3 - Prob. 3STCh. 16.5 - Prob. 1STCh. 16.5 - Prob. 2STCh. 16 - Prob. 1QPCh. 16 - Prob. 2QP
Ch. 16 - Prob. 3QPCh. 16 - Prob. 4QPCh. 16 - Prob. 5QPCh. 16 - Prob. 6QPCh. 16 - Prob. 7QPCh. 16 - Prob. 8QPCh. 16 - Prob. 9QPCh. 16 - Prob. 10QPCh. 16 - Prob. 11QPCh. 16 - Prob. 12QPCh. 16 - Prob. 13QPCh. 16 - Prob. 14QPCh. 16 - Prob. 15QPCh. 16 - Prob. 1WNGCh. 16 - Prob. 2WNGCh. 16 - Prob. 3WNGCh. 16 - Prob. 4WNGCh. 16 - Prob. 5WNG
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- Would it be plausible to claim that the theory of rational expectations is a distorted form of neoclassical economics? Explain.arrow_forwardA friend of yours (who has not taken macroeconomics) has just read that Keynesian theory represented a direct attack on Classical theory. They don't understand either theory and knows you (having just taken macroeconomics) are well-versed in both. They ask you to explain the basic differences between how Keynes and the Classics understood the business cycle and their respective policy prescriptions. Your answer should probably include: a) a basic explanation of what full-employment GDP means and how it relates to the stability condition S=| (or, equivalently, leakages = injections); b) an explanation of why the Classicals believed that any movement away from full-employment GDP would be quickly fixed/reversed; c) an explanation of why Keynes thought the Classicals* "auto-correcting" story was problematic, i.e., a detailed explanation of Keynes' multiplier concept (how did Keynes believe a recession would unfold (step-by-step) and why did he believe it could persist); d) an explanation…arrow_forwardHow can expectations about the future change what consumer buy now?arrow_forward
- Now think about a major recession, like the one that occurred in 1982. (Hint: a major recession could be caused by a large shift to the left in the AD curve.) Why would a Keynesian policy make more sense in response to a major recession like the one that occurred in 1982? What would be the cost of following a neoclassical policy then?arrow_forwardWhat is the philosophical, economic essence of Keynesian doctrine or “Keynesianism” that emerged from the experience and attempted explanations of the Great Depression ? What would all Keynesians believe, in order to be “Keynesian?”arrow_forwardApparently, Keynes assumed stable prices regardless of the level of government money creation. Was this naive or simply wrong? Keynes had a great many theories within what he called his general theory which might have been discussed by him un-knowingly after his death. The tradeoff between inflation and unemployment, the so-called "Phillips Curve," by Milton Friedman reduced the need of disposable government spending claiming it was inflationary. Barron's suggests that the collapse of Keynes's theory was due to the global inflation that are so consistently referred to in many of its articles. We really can't say what was Keynes intent and all we can say is that all the above are true. both B and C are correct Darrow_forward
- Analyze the implications of the New Keynesian Approach for rational Expectations. State your assumptions very well.arrow_forwardAccording to the neoclassical theory of distribution, a worker's real wage reflects her productivity. Let's use this insight to examine the incomes of two groups of workers: farmers and barbers. Let W, and W, be the nominal wages of farmers and barbers, P, and P, be the prices of food and haircuts, and MPL, and MPL, be the marginal productivity of farmers and barbers. a. Over the past century, the productivity of farmers (MPL) has risen substantially due to technological progress. According to the neoclassical theory, farmers' real wage (W/P) should have remained constant. increased. decreased. b. Over the past century, the productivity of barbers (MPL) has remained constant. According to the neoclassical theory, barbers' real wage (W/Pb) should have decreased. increased. Incorrect c. In parts a and b, real wages are measured as units of output per hour worked. the ratio of capital to labor. fluctuated randomly. Incorrect remained constant. fluctuated randomly. output per worker times…arrow_forwardWould it make sense to argue that rational expectations economics is an extreme version of neoclassicaleconomics? Explain.arrow_forward
- How were the Keynesian, Monetarist and New Classical theories of the economy synthesized to develop the New Keynesian Economics?arrow_forwardWhat’s the difference between how a Keynesian economist would sketch an AS curve and a Phillips curve, and how a neoclassical economist would sketch an AS curve and a Phillips curve? How is the shape of the different AS curves linked to the different shape of the Phillips curves?arrow_forwardKeynesian Assault on Classical Economics: Why did a drastic change in the economic atmosphere of the time lead Keynes to use the word, “nincompoops,” to describe the classical economists & their followers? Explain.arrow_forward
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