Islm Curve

ECON 2301 Principles of Macroeconomics Time: Th 7:05 pm – 9:45 pm Synonym: 40512 Section: 023 Room: NRG2 2120

Mankiw, N. G. R. E. G. O. R. Y. (2014). Principles of macroeconomics. Cengage Learning.

Preface to the new edition: After Henry Hazlitt wrote the first edition of Econ in One Lesson in 1946, a revised edition came out with a new chapter that Hazlitt found important. This added chapter was about rent control. Hazlitt felt that these lessons were important because they would be applicable for the years to come, until the reprint in 1979.

In order to discuss the statement in the title, I will first talk about J. M. Keynes and give some general information regarding his life and career. Following I will discuss about Keynes criticism of Say’s Law starting with Aggregate Demand and how consumption together with investment are in relation to income. Afterwards I will highlight the role of investment and what the policy implications are. For the final part of this essay I will conclude with some evidence to support the claims made.

Throughout this problem set I will analyze the effects of compound interest. I will start with problem one assessing as to whether or not a Private in my platoon can afford a brand new vehicle. I will develop a discrete dynamical system to calculate the amount of capital left in the loan at any given month. To assess if my discrete dynamical function is accurate I will interpret my model through graphs and make sure the answer is logical. I will find out how much my soldier can afford and any other question asked. If this does not coincide with the amount the actual payment will be I will give him another recommendation.

The long-run equilibrium of the economy is found where the aggregate-demand curve crosses the long-run aggregate-supply curve (point A). When the economy reaches this long-run equilibrium, the expected price level will have adjusted to equal the actual price level. As a result, the short-run aggregate-supply curve crosses this point as well.

is initially in both short and long run equilibrium [Hint: Your diagrams for each part should look

Monetary development is something that everybody around the globe battles with ordinary. A great many people are unmindful in respect to what 's genuinely happens in the economy as to expansion, unemployment, and loan costs; these things are all directed by a national bank called the Federal Reserve System. The arrangement that I will talk about in this paper chooses if unemployment, hobby, and swelling declines or increment is fiscal strategy. Money related arrangement chooses what value a man pays for a thing at the store, the amount of premium a man will get charged on an advance for an auto. These are all things that no one genuinely asks themselves, a great many people simply search around and pick the best value or the best financing

Refer to the sets of the aggregate demand, short-run aggregate supply, and long-run aggregate supply curves. Use the graphs to explain the process and steps by which each of the following economic scenarios will shift the economy from one long-run macroeconomic equilibrium to another equilibrium. Under each scenario, elaborate the short-run and long-run effects of the shifts in the aggregate demand and aggregate supply curves on the aggregate price level and aggregate output (real GDP).

Furthermore, the text is clear and well-organized. However, the number of tables, and figures can cause distraction. Moreover, the authors facts are accurate to an extend since they are collected through surveys we can not say it is accurate for sure. Nonetheless, the usage of important and complex words has been explained through the essay. Such as “Precariat” which is used to reflect on the existence of a group which is characterized by enormous amount of insecurities on the combined measure of the capital (1). The evidences provided by the writers are sufficient and are directly related to the argument of the essay. Nonetheless, the text is appropriate for it’s intendent audience which are academic scholar writers, economists, and researchers. On the other hand, the text does not refute any opposing point of views, which in return weakens the argument since the writer did not cover all aspects of the argument. Moreover, the text is able to develop a clear understanding of the subject, by explaining each idea with evidence, and explaining the significance of complex words. Nonetheless, many details could have been summarized which can make it easier and faster for audience to read it and understand

In “Unsolved Theoretical Questions”, Galbraith suggests the current and past debates about the concept of the NAIRU, and then raises several concerns about the validity and usefulness of the natural rate. The idea of the natural rate was invented by Milton Friedman (1968) and Edmund Phelps (1968). Specifically, it was Friedman’s presidential lecture that

Keynes’ theory suggests that individuals will not necessarily demand what is produced, therefore firms must produce what consumers demand rather than simply expanding production (increasing supply, which previously was assumed to increase aggregate demand). Thus, the level of economic activity, or total output (O) was determined by the total expenditure (E) within an economy. The amount spent by firms, individuals, the government and foreigners is determined by their level of income (Y), which is determined by their level of production (O). Therefore, Keynes proposed that the equilibrium level of income, where there is no tendency to change occurs when:

This work was printed from camera-ready copy submitted by the Unit Coordinator. The Flexible Learning Centre of the University of South Australia was not involved in its production.

Keynes established the theory of the multiplier effect. Keynesians believe that, because prices are somewhat predictable, variations in spending, such as consumption, investment, or government expenditures, cause output to fluctuate. For example, if government spending increases and all other components remain constant, then output will increase. The multiplier effect is defined as “output increases by a multiple of the original change in spending that caused it.”(3) This means, that if the government were to increase their spending by ten billion dollars, it could cause the total output to rise by fifteen billion dollars (a multiplier of 1.5) or by five billion (a multiplier of 0.5). Thus the money that gets injected into the economy creates a multiplier effect and promotes more circulation of money by creating

What is Say’s law? Compare and contrast the role that it plays in the Classical approach and Keynes’ approach. Draw the implications for the design of monetary and fiscal policies to stabilize an economy.