According to the Keynesian model, demand shocks affect output in the short run because: nominal wages are sticky. employment can be adjusted quickly. real wages do not change as inflation
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According to the Keynesian model, demand shocks affect output in the short run because:
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nominal wages are sticky. |
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employment can be adjusted quickly. |
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real wages do not change as inflation changes. |
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None of the above. |
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- Consider a standard AD-AS model. The economy is affected by the following sequence of events. In period 1 there is a shock to the economy that is temporary. In period 2, the shock ends. But having observed an inflation outcome different to the inflation target, inflation expectations change from the inflation target to a value exactly equal to the observed inflation in period 1 (that is, expectations are not `anchored’). A temporary positive demand shock would lead to output above potential in period 1, but below potential in period 2. Answer true or false. Please briefly explain your answer.Consider a standard AD-AS model. The economy is affected by the following sequence of events. In period 1 there is a shock to the economy that is temporary. In period 2, the shock ends. But having observed an inflation outcome different to the inflation target, inflation expectations change from the inflation target to a value exactly equal to the observed inflation in period 1 (that is, expectations are not `anchored’). A temporary Negative demand shock would lead to output below potential in period 1, but above potential in period 2. Answer true or false. Please briefly explain your answer.Which characteristics are associated with the Keynesian theory? Choose all that apply. Group of answer choices Flexible prices Long-run view Long-run aggregate supply primarily affects economic growth (real GDP) Short run view Aggregate demand primarily affects economic growth (real GDP) Inflexible prices
- The Keynesian economic framework is based on an assumption that: A) an increase in government spending will cause the aggregate demand curve to shift to the left. B) people can afford a high level of government services. C) prices and wages are sticky and do not adjust rapidly. D) an increase in government spending will cause the aggregate demand curve to shift to the left.new keynesian models assume that the business cycle fluctuations are driven by the aggregate demand components true or falseIn the New Keynesian Rational Expectations model with a Taylor rule, if the central bank follows the Taylor principle A. there are two steady states. B. there is one steady state. C. there are three steady states. D. there is no steady state. E. there are many steady states.
- In the Keynesian model, which of the following events lead to an increase in aggregate demand? (This is a multiple answer question. One of more options may be correct) a. An increase in the sales tax b. A new infrastructure project by the Federal government c. An increase in value of the Euro relative to the US-Dollar d. A drop in business confidence.In recent years, the US and few developed countries have interest rates falling to very low levels. Explain this situation according to Keynesian theory.In the Keynesian model, an increase in government spending increases ___. A.aggregate demand by an equal amount. B.aggregate demand by a multiple amount. C.the money supply by a multiple amount. D.the money supply by an equal amount.
- In the Keynesian framework, for each of the following events which might cause a recession and/or inflation? Explain using Aggregate Demand/ Aggregate Supply. a. A large increase in the price of the homes that people own b. Rapid growth in the economy of a major trading partner c. The development of a major new technology offers profitable opportunities for business d. The interest rate rises e. The good imported from a major trading partner becomes much less expensive. Which of the following statements is most accurate? The Keynesian model focuses on aggregate demand while the classical model focuses on aggregate supply. The Keynesian model focuses on aggregate supply while the classical model focuses on aggregate demand. The Keynesian model focuses on long run while the classical model focuses on short run. The Keynesian model calls for no government intervention while the classical model insist the government should act to a macroeconomy.Which of the following is the impulse in the Keynesian business cycle A change by the Fed in the growth rate of the quantity of money An unexpected change in the growth rate of productivity An unexpected change in aggregate demand A change in expectations about the future sales and profits
