Macroeconomics (9th Global Edition)
9th Edition
ISBN: 9780134141534
Author: Andrew B. Abel, Ben Bernanke
Publisher: Pearson Global Edition
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Chapter 1, Problem 9RQ
To determine
The different views on the speed of adjustments of prices and wages according to the Classical and Keynesian schools of thought and the key consequences of such varying views.
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Compare the classical and Keynesian views on the speed of wage and priceadjustment. What are the important consequences of the differences in theirviews?
Analyse how a Neoclassical version of the labour market would indicate that, in equilibrium, all unemployment is voluntary, and how, assuming imperfect competition instead, would account for the existence of some involuntary unemployment.
Discuss Keynesian view of minimum wage legislation on employment.
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Macroeconomics (9th Global Edition)
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- According to the Keynesian and New Keynesian theories;a. Show and explain the existence of involuntary unemployment in the labor market by using the Efficiency Wage Theory.arrow_forwardAn economic theory regarding the effect of an economic variable on another when all other factors stay constant is called _____. laissez faire Keynesian e pluribus unum Ceteris Paribusarrow_forwardDefine the three macroeconomic variables (inflation, unemployment, growth)arrow_forward
- Graphically illustrate (using the WS and PS relations) and explain the effects of an increase in the minimum wage on the equilibrium real wage and the natural rate of unemployment. This is one of the questions of Macroeconomics. Thanks in advance :)arrow_forwardHowever, the labor market is a derivative of the goods market in the Keynesian theory (“principle of effective demand”).Therefore, the unemployment is explained by the lack of demand in the goods market.According to the Keynesian theory, what would happen to the unemployment rate of real wages fall? How should unemployment be reduced?arrow_forwardWhat are the principal differences between the Neoclassical and Keynesian approaches with examplesarrow_forward
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