Explain why proponents of Keynesian economics believe that it is unlikely for wages and prices to decrease, even if cyclical unemployment is high, and therefore the best remedy to correct a recessionary gap is through stimulating AD. How can just a little bit more extra spending in the economy lead to a much greater impact on real GDP produced? (12.2)

Explain why proponents of Keynesian economics believe that it is unlikely for wages and prices to decrease, even if cyclical unemployment is high, and therefore the best remedy to correct a recessionary gap is through stimulating AD. How can just a little bit more extra spending in the economy lead to a much greater impact on real GDP produced? (12.2)

Economics: Private and Public Choice (MindTap Course List)

16th Edition

ISBN:9781305506725

Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson

Publisher:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson

Chapter7: Taking The Nation's Economic Pulse

Section: Chapter Questions

Problem 1CQ

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Bangladesh Bank has created additional money worth Tk70,794 crore through various refinance schemes and easing regulatory requirements after the Covid-19 outbreak in March for stimulating demand to revive the declining economy. Usually, banks disburse loans of Tk70,000-Tk80,000 crore every year following credit demand, but lending capacity is assumed to be less this year due to borrowers not returning money amid a shutdown of business activities. So the central bank expects that about Tk30,000 crore will come from banks this year. As a result, total Tk one lakh crore is ready to flow in the market, said a senior executive of the Bangladesh Bank. Bangladesh Bank has formed a refinancing fund of Tk25,000 crore to support banks in executing two stimulus packages of Tk50,000 crore, announced by the government for large and small industries. The central bank also formed a Tk5,000 crore pre-shipment refinance scheme to help export-oriented industries. Furthermore, the Export Development Fund…
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