Microeconomics: Private and Public Choice (MindTap Course List)
15th Edition
ISBN: 9781285453569
Author: James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher: Cengage Learning
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Question
Chapter ST4, Problem 1CQ
To determine
Explain the Keynesian concept.
Expert Solution & Answer
Explanation of Solution
According to Keynes, only the government intervention with increasing spending can stimulate the economy. When the government spends money, the investments will increase. An increase in the investments cause to increase the employment and thereby the output in an economy. On the final result, aggregate
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Students have asked these similar questions
According to Keynes, when the price level rises, it causes the interest rate to do what? It causes the level of business spending to do what?
a. It causes a decrease in the interest rate, as people adjust to higher prices and purchase less; business spending decreases as well.
b. It causes a decrease in the interest rate, as people adjust to higher prices and purchase less; business spending goes up.
c. It causes an increase in the interest rate, due to greater consumer demand for money to spend; business spending goes up as well.
d. It causes an increase in the interest rate, due to a greater consumer demand for money to spend; business spending decreases.
If the government spending increases, will net exports (X-M) increase?
Incorrect
Question 6
What word does Keynes use to describe the difference between
everything an economy produces and everything it consumes?
O savings
O employment
inflation
Chapter ST4 Solutions
Microeconomics: Private and Public Choice (MindTap Course List)
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- An economy has three sectors: manufacturing, underwater basket weaving, and energy. Manufacturing sells 30% of its output to underwater basket weaving, 30% of its output to energy, and keeps the rest. Underwater basket weaving sells 10% of its output to manufacturing, 80% of its output to energy, and keeps the rest. Energy sells 40% of its output to manufacturing, 35% of its output to underwater basket weaving, and keeps the rest. If the economy is in equilibrium, and the value of energy is $8,500,000,000, find the value of underwater basket weaving. You are encouraged to use Octave for this problem. Your answer should be exact so use "format rat."arrow_forwardWhich of the following correctly describes how a decrease in the price level affects consumption spending? Select one: a. A decrease in the price level raises real wealth, which causes consumption to increase. b. A decrease in the price level decreases the amount of money a household needs to buy goods and so raises the interest rate, which causes consumption to increase. c. A decrease in the price level increases the amount of money a household needs to buy goods and so raises the interest rate, which causes consumption to increase. d. A decrease in the price level lowers real wealth, which causes consumption to decrease.arrow_forwardThe table below shows data for three fictitious countries. a. Compute the current MPC for each country. Instructions: Round your answers to two decimal places. Income and Consumption Data, Three Countries Change in Income (dollars) $9,830 40,000 5,870 Change in Consumption (dollars) $6,789 31,650 5,500 b. Which country has the highest marginal propensity to save (MPS)? (Click to select) c. If income in Bedrup increases by $360 and income in Cedrup increases by $690, which of the following statements is correct? Country Adrup Bedrup Cedrup MPC O Neither Bedrup nor Cedrup will save any dollars. O Cedrup will save more dollars. O Bedrup will save more dollars. O Dollar savings will be the same for both Bedrup and Cedrup.arrow_forward
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