Principles of Economics (Second Edition)
2nd Edition
ISBN: 9780393614077
Author: coppock, Lee; Mateer, Dirk
Publisher: W. W. Norton & Company
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Chapter 27, Problem 3QFR
To determine
To explain:
The important factor of the economy for Keynesian and classical economists and their assumptions that leads to their theory.
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Students have asked these similar questions
A key difference between neoclassical and Keynesian economists is how to predict and treat the future growth of the economy. Neoclassicalists believe the focus should be on ____________ and Keynesians believe the focus should be on _________________. A, B, C, OR D ONE ANSWER
A
short-term problems; long-term problems
B
long-term problems; short-term problems
C
long-term problems; long-term problems
D
short-term problems; short-term problems
What would a Keynesian likely recommend in response to a recession? What would a neoclassical likely recommend? Why would a Keynesian policy response not make much sense in response to a minor recession like the one that occurred in 1990? What would be the cost of letting the economy adjust by itself to a new long run equilibrium?
Can someone please answer both questions asap?In a basic Keynesian macroeconomic model, if Effective demand is greater than the output then
A.
ED > Y(I > S) - V (decrease) Y (increase)
B.
ED > Y(I > S) - V (increase) Y (decrease)
C.
ED < Y(I < S) - V (decrease) Y (increase)
D.
ED < Y(I < S) - V (increase) Y (decrease)
Question 2
What would happen in the market for loanable funds if the government were to decrease the tax rate on interest income?
A. The supply of and demand for loanable funds would shift right.
B. The supply of and demand for loanable funds would shift left.
C. The supply of loanable funds would shift right and the demand for loanable funds would shift left.
D. None of the above is correct.
Chapter 27 Solutions
Principles of Economics (Second Edition)
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- What 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_forwardCompare and contrast the use of government spending changes versus tax changes as a means of influencing the course of the economy. Is one or the other preferable in specific situations? What are the short-run and long-run implications? What solutions do you recommend? (Think beyond the scope of the video and keep it to economical thought.) What would a Neoclassical economist say about your solutions? What would a Keynesian economist say about your solutions? Apply economic theories and models to support your responsearrow_forwardFor this assignment, please write a 200-300 word defense of either the Keynesian perspective or the Neoclassical perspective of economics. In other words, which worldview makes the most sense to you? You are encouraged to relate your explanation to specific examples, politics, the fashion industry, your own life, etc.arrow_forward
- What is the best approach to managing the economy, supply-side or demand-side economics? There are two schools of thought on how to managing the economy. The first is demand-side economics which also the Keynesian approach. This approach maintains that the demand for products and services drives the economy as such economic policies should focus on the aggregate demand curve. The other approach is called supply-side economics or more popularly referred to as Reaganomics. In this trickle-down approach, it is postulated that the production of goods and services is what drives the economy with the focus on the aggregate supply curve. Both fiscal and monetary policies have the potential to stimulate change in either the aggregated demand or the aggregate supply curves. In your initial post defend which approach should be used to (ensure to include in your subject line, which approach you are defending): Restore the economy that is in a recession. Identify the challenges that may be…arrow_forwardA neoclassical economist and a Keynesian economist are studying the economy of Vineland. It appears that Vineland is beginning to experience a mild recession with a decrease in aggregate demand. Which of these two economists would likely advocate that the government of Vineland take active measures to reverse this decline in aggregate demand? Why?arrow_forwardExplain what is meant by ‘macroeconomics’ and why some economists think that it is different to standard neoclassical economics. explain with graphs please.arrow_forward
- A principle difference between the new Classical and the new Keynesian models has to do with the choices made by business firms. We find that: a)new classical business firms choose the output level given the price level, while new Keynesian firms choose the price level given the level of output. b)new classical business firms choose the price level given the output level, while new Keynesian firms choose the output level given the level of output. c)both new classical and new Keynesian firms select the price level, but only new classical firms select the output level. d)both new classical and new Keynesian firms select the output level, but only Keynesian firms select the price level.arrow_forwardLet’s see whether the Keynesian conclusions hold under two differentscenarios.We still assume that (1) Prices were sticky, (2) Money market always clear. Now, instead of assuming that output isdemand determined we use the assumption that OUTPUT IS ALWAYS SUPPLY DETERMINED (in other words, if Y d isdifferent from Y s, then Y = Y s.)1. Under this new set up, starting from a classical equilibrium, what is the effect on the interest rate and on output ofa DECREASE in money supply?arrow_forwardAccording to a neoclassical perspective, in the long run, a surge in aggregate demand will most likely result in A) A rise in the level of output. B) An increase in the aggregate price level. C) A decline in the level of output D) Downward pressure on the price level.arrow_forward
- Explain how Milton Friedman's economic views differed from those of Keynes and explain why more recent developments in the global economy can be said to have vindicated both Friedman's and Keynesian economic views.arrow_forwardAccording to Keynesian economics, what is the suggested approach to address a recession? A) Reduce government spending and taxes. B) Increase government spending to stimulate demand. C) Maintain a hands-off approach and let markets self-correct. D) Raise interest rates to control inflation.arrow_forwardWhat is meant by dynamic inconsistency? Give at least two examples of policies that are dynamically inconsistent.arrow_forward
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