7) According to New Keynesian theory, economic shocks can arise as a result of: O A) Microeconomic imperfection B) Lack of government spending on durable goods OC) Monetary neutrality OD) Excess monetary reserves

7) According to New Keynesian theory, economic shocks can arise as a result of: O A) Microeconomic imperfection B) Lack of government spending on durable goods OC) Monetary neutrality OD) Excess monetary reserves

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter25: The Keynesian Perspective

Section: Chapter Questions

Problem 6SCQ: Does Keynesian economics require government to set controls on prices, wages, or interest rates?

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7. Assuming Aggregate Demand and Aggregate Supply are initially at ADo and ASo respectively, and AD1 and AS1 represent changes, which of the above graphs depict the work of Keynesian macroeconomic policy? a) Figures A & B b) Figures A & C c) Figures C & D d) Figures B & D
QUESTION 6 06. Which of the following statements about Keynesian policy are TRUE? a) Keynesian policy is most effective in the flat Keynesian (or Depression) range of the Short-Rum Aggregate Supply (AS) curve, where increases in Aggregate Demand are not likely to cause products price inflation. b) Keynesian policy is totally ineffective in the vertical Classical (past-full employment) range of the Short-Run Aggregate Supply (AS) curve, where an increase in Aggregate Demand will be completely dissipated by products price inflation. c) In the Intermediate range of the Short-Run Aggregate Supply (AS) curve, the effectiveness of Keynesian policy is partially dissipated by products price inflation. d) The Short-Run Aggregate Supply (AS) curve may will be vertical when the economy is trying to produce beyond full employment. But a vertical AS curve can also result from resource suppliers acting on inflationary expectations. This too will make Keynesian…
QUESTION 6 06. Which of the following statements about Keynesian policy are TRUE? Multiple answers a) Keynesian policy is most effective in the flat Keynesian (or Depression) range of the Short-Rum Aggregate Supply (AS) curve, where increases in Aggregate Demand are not likely to cause products price inflation. b) Keynesian policy is totally ineffective in the vertical Classical (past-full employment) range of the Short-Run Aggregate Supply (AS) curve, where an increase in Aggregate Demand will be completely dissipated by products price inflation. c) In the Intermediate range of the Short-Run Aggregate Supply (AS) curve, the effectiveness of Keynesian policy is partially dissipated by products price inflation. d) The Short-Run Aggregate Supply (AS) curve may will be vertical when the economy is trying to produce beyond full employment. But a vertical AS curve can also result from resource suppliers acting on inflationary expectations. This too will…
Question 1 a) In light of the New Keynesian model, answer each of the following questions about the Central Bank’s adjustment of interest rate in response to each of the following shocks. Note that in each case, the Central Bank wants the output gap to be zero. (i) There is an increase in demand for money. (ii) There is a fall in current total factor productivity due to the pandemic. (iii) There is an expected increase in future total factor productivity due to the discovery of new technologies. b) In the New Keynesian model, assume that the economy is in a liquidity trap. Show that the Central Bank could somehow convince the public of more expected inflation in the future. Use an appropriate set of diagrams to explain your answers.
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