Principles of Economics (Second Edition)
2nd Edition
ISBN: 9780393614077
Author: coppock, Lee; Mateer, Dirk
Publisher: W. W. Norton & Company
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Question
Chapter 27, Problem 6QFR
To determine
(a)
To explain:
Whether price flexibility as a statement is of Keynesian view, classical view or not both.
To determine
(b)
To explain:
Whether focus being on
To determine
(c)
To explain:
Whether spending made as the key factor of the output as a statement is of Keynesian view, classical view or not both.
To determine
(d)
To explain:
Whether capital being key source for growth in an economy as a statement is of Keynesian view, classical view or not both.
To determine
(e)
To explain:
Whether saving unfavorable to economy as a statement is of Keynesian view, classical view or not both.
To determine
(f)
To explain:
The macroeconomy takes care of itselfas a statement is of Keynesian view, classical view or not both.
To determine
(g)
To explain:
The borrowing of a dollar requires saving of a dollar as a statement is of Keynesian view, classical view or not both.
To determine
h.
To explain:
Whether macroeconomy being inherently unstable as a statement is of Keynesian view, classical view or not both.
To determine
i.
To explain:
Whether the full employment being at the natural
To determine
j.
To explain:
The prices that do not adjust downward as a statement is of Keynesian view, classical view or not both.
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Figure 1: Hayek’s (Classical) AD-AS Model
1.1. Hayek says that markets will heal themselves and that government should not intervene. How does the AD-AS model reflect Hayek’s idea that governments cannot increase real GDP beyond the level that the free market economy is able to produce?
1.2. Do you believe that the Hayek’s classical AD-AS model explain the factors that cause changes (shifts) in AS realistically? Why or why not?
Figure 2: Keynes’s AD-AS Model
2.1. In Figure 2 above, what are the factors that may cause the aggregate demand to shift from AD to AD1? What is the difference between demand pull inflation, cost push inflation and recession?
2.2. In macroeconomics, the immediate short run is known as a length of time when both input prices and output prices are fixed. In the short-run, input prices are fixed but output prices are variable. In the long run, input prices and output prices can vary.
Describe the AS curve in the Immediate Short run.
Describe the AS curve…
The Keynesian model suggests that .... should be preferred over .... since the ..... is larger than the .....
a. fiscal policy / monetary policy / unplanned changes in inventories / marginal propensity to consume.
b. fiscal policy / monetary policy / impact of money supply / marginal propensity to consume.
c. government sprending / tax cuts / tax multiplier / government-spending multiplier.
d. government sprending / tax cuts / government-spending multiplier / tax multiplier.
e. monetary policy / fiscal policy / impact of money supply / marginal propensity to consume.
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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Similar questions
- Consider a country whose economic structure matches the assumptions of the classical model. After reading a recent best-seller documenting a growing population of low-income elderly people who were ill prepared for retirement, most residents of this country decide to increase their saving at any given interest rate. Explain whether or how this could affect the following: a. The current equilibrium interest rate b. Current equilibrium real GDP c. Current equilibrium employment d. Current equilibrium investment e. Future equilibrium real GDParrow_forwardIn the simplest (or introductory) form of the Keynesian model, which of the following decisions can we analyse? A. Interest rate fluctuations. B. Saving of households. C. Investment by government. D. Foreign investment by firms. E. Wage levels in firms.arrow_forwardWhich of the following statements of fact about the role of the Canadian government in the economy is MOST consistent with Keynesian economic theory? a. Canadian Crown corporations, such as Canada Post and the Canadian Dairy Commission, are run at a a cost to taxpayers b. The regulation of industry in Canada ensure worker safety standards are met. c. Crown corporations provide competition to the private sector of the economy d. The Canadian government, through the Bank of Canada, can increase or decrease the rate of economic growtharrow_forward
- 1. Explain the difference between Keynesian economics and Classical economics by mentioning the complete name of the economist who develops the theory/model. 2. Describe each of the components of the GNP equation and which one you feel can distort GNP the most.arrow_forwardMacroeconomic policy is concerned with the operation of the economy as a whole. In broad terms, the goal of macroeconomic policy is to provide a stable economic environment that is conducive to fostering strong and sustainable economic growth, on which the creation of jobs, wealth and improved living standards depend. ?" https://www.aph.gov.au/About Parliament/Parliamentary Departments/Parliamentary Library/pubs/BriefingBook44p/ Which one of the following is NOT an objective of macroeconomic policy? A. To reduce unemployment. O B. To stabilise the price of maize. O C. To bring or keep inflation under control. O D. To increase the rate of economic growth.arrow_forwardThe simple Keynesian model a. understated the effect of an increase in government spending by neglecting the necessary decrease in the interest rate and consequent decrease in investment that accompany an increase in government spending. b. overstated the effect of an increase in government spending by neglecting the necessary decrease in the interest rate and consequent increase in investment that accompanies a decrease in government spending. c. overstated the effect of an increase in government spending by neglecting the necessary increase in the interest rate and consequent decline in investment that accompany an increase in government spending. d. understated the effect of an increase in government spending by neglecting the necessary increase in the interest rate and consequent decline in investment that accompany an increase in government spending.arrow_forward
- If a Keynesian economist were asked to make a statement about the relationship between the government and the economy, what might she say? a. “Government intervention in the economy is sometimes necessary.” b. “Government intervention is the only solution for economic problems.” c. “It is never a good idea for the government to intervene in the economy.” d. “The government should be primarily concerned with public safety and health.” e. “The government’s only role is to provide defense and protect property rights.”arrow_forwardTrue or false Macroeconomics deals with the economy as wholearrow_forwardThe purpose is to know if you can define each concept through a clear and precise explanation. Imagine that you are going to explain each term to someone who does not know anything about macroeconomics; With this in mind, the explanation should be as clear and simple as possible (not brief). Write a minimum of three sentences per term.1. investment demand2. surplus3. savings offerarrow_forward
- 2. Let's create a simple, two-period neoclassical model In this question, in period t you only use labor to make period t output, and then you decide how much of that output to convert into capital that can be used later to help make period t+1 output. That means the "representative agent" has to decide how much of period t output to consume rather than save, but there's no such choice in period t+1. After all, t+1 is the end of time. Output is made in this very simple, constant returns to scale manner, so in each period double the input creates double the output: Y₁ = N₁ Y zK = You get log utility from consumption in the first period, but square root in the second period Of course, you don't like work, so extra hours of work hurt your utility: U = ln(Ct) — mNt + 2(Ct+1)¹/² In this simple economy with no externalities and perfect property rights, Adam Smith's Invisible Hand Theorem will hold in its most optimistic form: A benevo- lent social planner and a decentralized private market…arrow_forwardJohn Maynard Keynes spearheaded a new school of macroeconomic theory during the Great Depression. Which of the following represents a Keynesian point of view of macroeconomics?arrow_forwardSuppose the economy goes into a recession. Which statement reflects a Keynesian response, and which reflects a neoclassical response? A. "The recession is likely caused by bad government policy, so active policy to solve the problem should be avoided" B. "The government should use fiscal policy to boost spending" 1. Neoclassical 2. Keynesianarrow_forward
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