Macroeconomics: Private and Public Choice (MindTap Course List)
16th Edition
ISBN: 9781305506756
Author: James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher: Cengage Learning
expand_more
expand_more
format_list_bulleted
Question
Chapter 10, Problem 4CQ
To determine
Identify the effect of pessimistic thought on the speed and strengthen the recovery.
Expert Solution & Answer
Trending nowThis is a popular solution!
Students have asked these similar questions
When an economy dips into a recession, consumers will often be relatively pessimistic about the future for an extended period time. How will this pesimism affect the speed and strength of the recovery?
Suppose the economy of a hypothetical country has reached its long-run macroeconomic equilibrium when each of the following aggregate demand shocks occurs.
The economy of a hypothetical country has been stable for two or three years with very low unemployment. Wages have been gradually increasing during this time. Now stock market prices begin significant increases, causing peoples’ investments, such as their retirement accounts and other investments, to increase in value. People feel very good about the future and use their new-found wealth to buy things that they had been hesitant to purchase in the past. Describe, in a short essay inserted below these questions, how the economic situation will change and how the government could best respond to these changes. Include detailed answers to the following questions in your essay:
What kind of economic gap will start to occur (inflationary or recessionary)?
What kind of fiscal policy might be helpful to stabilize the economy…
How can shipping delays and shortages of intermediate goods cause a recession?
Why may these issues lead to a reduction in consumer spending? Consider how consumers change the timing of their purchases to reflect the market.
Chapter 10 Solutions
Macroeconomics: Private and Public Choice (MindTap Course List)
Knowledge Booster
Similar questions
- Assume that the housing market is in equilibrium in year 1. In year 2, the mortgage rate that banks charge consumers decreases, but producers are not affected. Also in year 2, the cost of lumber used to build homes decreases. Which of the following is most likely to be the equilibrium change? a The equilibrium will be at point C before the change in expectations and point B after the change b The equilibrium will be at point A before the change in expectations and point B after the change c The equilibrium will be at point A before the change in expectations and point E after the change d The equilibrium will be at point E before the change in expectations and point A after the changearrow_forwardWhich of the following could cause the US economy to go into a recession? a) a declining stock market and an increase in unemployment b) an increase in pessimism by consumers and businesses c) All of the choices are correct d) a decrease in Aggregate Demand e) None of the choices is correctarrow_forwardFrom a spending model perspective, explain the causes and dynamics of a recession Identify and summarize the market dynamics triggered by changes in leakages and injections. How measures like GDP, unemployment and inflation play out in the different scenarios? How do propensities and multipliers, and even expectations affect the outcomes in a downturn?arrow_forward
- Explain in details how high inflation can lead to a recession in several ways.arrow_forwardWhat common rule of thumb do economists use to define a recession? A decline of 5% in GDP A decline of 10% in GDP One quarter of negative GDP growth Two quarters (six months)of negative GDP growtharrow_forwardIf the economy experiences inflation and economic growth, this means that aggregate demand grows by more than aggregate supply. True or Falsearrow_forward
- Consumer spending fell significantly at the start of the pandemic by 13.6%, but increased by 5.6% in June. Economists are predicting that in the next few months consumer spending may be positive but at a much lower rate than 5.6% as additional money for unemployment is no longer available, unemployment remains high, and uncertainty of the future. Consumer spending is closely watched since it is a primary predictor of how quickly the economy will recover from the current recession. How do you expect consumer spending might change over the next few months? Why? How has your spending been changing? Are you expecting to make any big purchases in the near future?arrow_forwardDescribe an economic environment which would be characterized by the term "stagflation". Using an AD - AS diagram, depict and given an example of a macroeconomic shock that would take an economy from a long - run equilibrium to a situation of stagflation. Label all points on the graph completely and point out the key characteristics associated with stagflation on your graph.arrow_forwardHow do Keynesians and classicals differ in their beliefs about how long it takes the economy to reach long-run equilibrium? What implications do these differences in beliefs have for Keynesian and classical views about the usefulness of antirecessionary policies? About the types of shocks that cause most recessions?arrow_forward
arrow_back_ios
arrow_forward_ios
Recommended textbooks for you
Macroeconomics: Private and Public Choice (MindTa...EconomicsISBN:9781305506756Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. MacphersonPublisher:Cengage Learning
Economics: Private and Public Choice (MindTap Cou...EconomicsISBN:9781305506725Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. MacphersonPublisher:Cengage Learning
Exploring EconomicsEconomicsISBN:9781544336329Author:Robert L. SextonPublisher:SAGE Publications, Inc
Macroeconomics: Private and Public Choice (MindTa...
Economics
ISBN:9781305506756
Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher:Cengage Learning
Economics: Private and Public Choice (MindTap Cou...
Economics
ISBN:9781305506725
Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher:Cengage Learning
Exploring Economics
Economics
ISBN:9781544336329
Author:Robert L. Sexton
Publisher:SAGE Publications, Inc