Macroeconomics for Today (MindTap Course List)
9th Edition
ISBN: 9781305507142
Author: Irvin B. Tucker
Publisher: Cengage Learning
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Question
Chapter 16.A, Problem 1SQ
To determine
The policy that is support by classical economists when the economy is in recession.
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Students have asked these similar questions
Which economic school relies most heavily on "sticky prices" to explain the effects of Aggregate Demand on GDP?
A. Keynesian
B. Monoetarist
C. Rational Expectations
D. Coordination Failure
1. For a long run closed economy, a plague
causes a sharp decrease in the labor force.
What happens to Y, W/P, R/P, r, C, I, P, e?
Explain with carefully labeled figures.
2. What happens if an investment tax credit
expires?
3. What happens if there is a sudden burst in
the economy's productivity?
4. What differentiates the short run
macroeconomic model from the one in the
very long run.
What are the important mechanisms that reverse the effects of a recession in a modern economy? (Check all that apply.)
A. Labor supply increases due to an increase in real wages.
B. The multipliers on wages and employment return to normal.
C. Labor demand increases due to expansionary government policies.
D. Labor demand increases due to market forces.
What market forces might cause the labor demand curve to shift back to the right? (Check all that apply.)
A. Technological advances encourage firms to expand their activities.
B. The banking system recuperates and businesses are again able to use credit to finance their activities.
C. Excess inventory has been sold off.
D. Wage rigidity decreases.
Chapter 16 Solutions
Macroeconomics for Today (MindTap Course List)
Ch. 16.3 - Prob. 1.1YTECh. 16.3 - Prob. 2.1YTECh. 16.3 - Prob. 2.2YTECh. 16.A - Prob. 1SQCh. 16.A - Prob. 2SQCh. 16.A - Prob. 3SQCh. 16.A - Prob. 4SQCh. 16.A - Prob. 5SQCh. 16.A - Prob. 6SQCh. 16.A - Prob. 7SQ
Ch. 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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Similar questions
- Consider the neo-classical approach to macroeconomics. What does that theory suggest will happen when there is a recession? Group of answer choices a. Wages will decrease b.Wages will increase c. Government should spend less money d. Government should spend more moneyarrow_forwardRefer to the figure at right. If the economy is currently operating at point C, then there is A. unemployment. B. a recessionary gap. C. deflation. D. an inflationary gap.arrow_forwardWhen we say that economic fluctuations are “irregular and unpredictable,” we mean thata. the relationship between output and unemployment is erratic and difficult to characterize.b. when one macroeconomic variable that measures income or spending is falling, other macroeconomic variables that measure income or spending are likely to be rising.c. recessions do not occur at regular intervals.d. All of the above are correct.arrow_forward
- In a classical economy, citizens begin to expect lower prices five years in the future. As a result, prices and nominal wages fall in the present and remain low, while GDP and real wages fall for a few months but then return to normal. Click the curve that depicts the described event. Price level (P) 110 100 90 Click or tap the appropriate place in the image. LRAS B A C AD₁ AD₁ AD2 Real GDP M (Vie You must Quest'oarrow_forward16. To be a Keynesian means that you believe in two principles. What are those two principles? a. b.arrow_forwardMatch the policies below to whether they would be said by a Keynesian or Neoclassical economist: A. Policy should concentrate on minimizing cyclical unemployment B. Since the long-run aggregate supply curve is fixed, increasing aggregate demand too much will just lead to inflation 1. Neoclassical 2. Keynesianarrow_forward
- 3.a. You are given the following data. Calculate GNP and GDP at factor cost. GNPMP 600Indirect Taxes 50Subsidies 30NFIA 100Depreciation 50Transfer payments 15Retained Earnings of Companies 25Personal Taxes 15Personal Savings 803.b. Explain Various Assumptions of Classical Macro Economics Theory.arrow_forwardIf the economy goes into a recessionary gap, a.) How will the change in wages affect short run AS and why?b.) As short run AS adjusts, what will happen to price level P and spending for output AD?c.) When will the adjustments in the labor market, wages, and AS stop and why?arrow_forwardAccording to classical macroeconomic theory, a. the price level is sticky in the short run and it plays only a minor role in the short-run adjustment process. b. for any given level of output, the interest rate adjusts to balance the supply of, and demand for, money. c. output is determined by the supplies of capital and labor and the available production technology. d. All of the above are correct.arrow_forward
- 0) Classical economists believe that the main source of recessions in the business cycle is: A. Lack of aggregate demand B. Negative supply shocks C. Lack of investment D. Crowding outarrow_forwardIs fiscal policy, say an increase in government expenditures (G), effective according to the Real Business Cycle (RBC) theory? If it is, should it be used? Explain by using production function, labor market, goods market and asset market equilibrium tools.arrow_forwardAnalyzing Macroeconomic Events with the IS-MP Diagram. Consider the following events in the macroeconomy. Show how to think about them using the IS-MP diagram. For each, explain how and why GDP in the United States is affected in the short run and show how the central bank should respond if it wishes to stabilize output. (a) The government offers a temporary investment tax credit: for each dollar of investment that firms undertake, they get a credit that reduces the taxes they pay on corporate income. (b) A housing bubble bursts, so that housing prices fall by 20% and new home sales drop sharply. (c) A resurgence of growth in Japan leads to an unexpected increase in the demand by Japanese consumers for U.S. goods.arrow_forward
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