What, according to Keynes, are the normal mechanisms for ensuring full- employment equilibrium given an increase in money demand? Discuss how each of them helps ensure full employment.
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What, according to Keynes, are the normal mechanisms for ensuring full- employment equilibrium given an increase in money
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Under what circumstances does a liquidity trap arise and why does it lead to a failure in the above mechanisms?
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- In the goods-and-services market actual inventories have started to rise above optimal inventories. What could have happened to autonomous money demand to bring this about? Explain and diagrammatically represent your answer. In doing so, be sure to explain and diagrammatically represent what happens to the rate of interest, investment, and Y. In explaining what happens to Y, be sure to fully explain the equilibrium process in the simple Keynesian modelAccording to Keynes, what are the three reasons individuals hold money? Provide a brief explanation of each.In one or two sentences, explain why Keynesian economists believe that increasing the money supply will be effective at increasing aggregate demand in the short run.
- What three motives for holding money did Keynes consider in his liquidity preference theory of the demand forreal money balances? On the basis of these motives, whatvariables did he think determined the demand for money?Explain and show in detail whether the following sentence is correct or incorrect: "For Keynes, the rigidity of the real wage was the fundamental factor to explain the possibility of a capitalist economy operating with a high rate of unemployment".Economist will focus on achieving macroeconomic goals. There are four major economic goals namely as full employment, price stability, economic growth and equitable distribution of income. However, it is impossible for a government to achieve all four macroeconomic goals simultaneously. Briefly discuss how a government will not be able to implement two particular goals at the same time. According to Keynes, people have demand for money due to three different motives foe holding money rather than other forms. Hence, identify the THREE (3) motives according to Keynesian approach.
- According to the Keynesian ideas on Aggregate Demand, a macroeconomist would most likely expect business expenditure to increase when ... Group of answer choices a. Interest rates are low and expected returns are low b. Interest rates are high and expected returns are high c. Interest rates are low and expected returns are high d. Interest rates are high and expected returns are lowKeynesian economics predicts that if government policy makers deem current equilibrium real Gross Domestic Product (GDP) to be "too low," then an appropriate policy action would be to do nothing, because the economy is self-adjusting. raise government spending, thereby increasing aggregate demand and pushing up real Gross Domestic Product (GDP) with little or no inflationary consequences. increase taxes, thereby causing aggregate demand to increase and inducing a rise in real Gross Domestic Product (GDP) with little or no inflationary consequences. reduce the money stock, thereby causing aggregate demand to decrease and inducing a rise in fall in the price level that generates an increase in total planned expenditures.If money demand does not depend on income then the IS/LM model predicts that there would be no crowding out of investment if government expenditure is increased. True or false?
- What are the pros and cons of studying the IS-LM Model?Why is the IS curve called the goods market equilibrium schedule?Why is the LM curve called the money market equilibrium schedule?Explain how the equilibrium levels of income and the interest rate change if there is an increase in autonomous investment ( or government spending).Derive the AD curve from the IS-LM model.Q11 Assume that investment does NOT depend on the interest rate. A reduction in the money supply will cause which of the following for this economy? Select one: a. no change in output. b. no change in the interest rate. c. a reduction in investment. d. an increase in investment.what is the impact of a contractionary policy on the U.S. economy from a new keynesian point of view? Show the impact using a graph.
