Macroeconomics
13th Edition
ISBN: 9781337617390
Author: Roger A. Arnold
Publisher: Cengage Learning
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Question
Chapter 10, Problem 4WNG
(a)
To determine
According to Keynes, why the aggregate demand is insufficient to bring about the full employment output level.
(b)
To determine
Decrease in consumption is not matched by increase in investment.
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Students have asked these similar questions
According to Keynes, wealth or credit is a factor that affects consumption. An example of wealth is A,B,C,OR D one answer
a
an increase in expected future income.
b
a decline in interest rates.
c
an increase in economic output.
d
an increase in the value of stock
Please write down whether the following statements are true or false, and explain your answer very briefly
A)If actual investment is greater than planned investment, inventories increase more than planned.
B)The marginal propensity to consume is the change in consumption expenditure divided by the percentage change in income.
C)Gross domestic product (GDP) is the value of all goods and services produced in an economy over a particular time period.
D)Monetary policy refers to taxation and spending policies implemented by government.
E)In a simple Keynesian model (with lump-sum taxes and a MPC of 0.8), a tax cut of 20 billion TL will have less of an impact on GDP than an increase in government spending of 10 billion TL.
D)When you take 1000 TL from your savings account and deposit it in your checking account, M2 decreases.
F)An open market purchase of government securities (such as Treasury Bills) by the Central Bank will decrease the money supply and raise the interest rate.…
Keynesian 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.
Chapter 10 Solutions
Macroeconomics
Ch. 10.1 - Prob. 1STCh. 10.1 - Prob. 2STCh. 10.1 - Prob. 3STCh. 10.2 - Prob. 1STCh. 10.2 - Prob. 2STCh. 10.2 - Prob. 3STCh. 10.3 - Prob. 1STCh. 10.3 - Prob. 2STCh. 10.3 - Prob. 3STCh. 10.4 - Prob. 1ST
Ch. 10.4 - Prob. 2STCh. 10 - Prob. 1QPCh. 10 - Prob. 2QPCh. 10 - Prob. 3QPCh. 10 - Prob. 4QPCh. 10 - Prob. 5QPCh. 10 - Prob. 6QPCh. 10 - Prob. 7QPCh. 10 - Prob. 8QPCh. 10 - Prob. 9QPCh. 10 - Prob. 10QPCh. 10 - Prob. 11QPCh. 10 - Prob. 12QPCh. 10 - Prob. 13QPCh. 10 - Prob. 14QPCh. 10 - Prob. 15QPCh. 10 - Prob. 16QPCh. 10 - Prob. 17QPCh. 10 - Prob. 18QPCh. 10 - Prob. 19QPCh. 10 - Prob. 20QPCh. 10 - Explain how to derive a total expenditures (TE)...Ch. 10 - Prob. 22QPCh. 10 - Prob. 23QPCh. 10 - Prob. 24QPCh. 10 - Prob. 25QPCh. 10 - Prob. 1WNGCh. 10 - Prob. 2WNGCh. 10 - Prob. 3WNGCh. 10 - Prob. 4WNGCh. 10 - Prob. 5WNGCh. 10 - Prob. 6WNGCh. 10 - Prob. 7WNGCh. 10 - Prob. 8WNG
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Similar questions
- Using a macroeconomics demand/supply analysis, where do you think current output is relative to what the economy is capable of producing? Look at recent trends in the data. What are the recent trends in the components of aggregate demand (consumption spending, investment spending, government purchases, and exports and imports?arrow_forwardUsing the Keynesian-cross diagram, the investment function diagram, and the IS Curve, illustrate what happens when consumer confidence falls (thus reducing autonomous consumptions. (See page 319 of the textbook.)arrow_forwardAccording to the classical economists, the supply curve is vertical at the level of potential GDP. What happens to the level of real output and price no matter where the demand curve is drawn?arrow_forward
- Explain the relationship between consumption and saving in the Keynesian model.arrow_forwardIn the Keynesian cross, the economy is in equilibrium when planned expenditure equals actual expenditure. However, when planned expenditure exceeds actual expenditure, unplanned inventory investment is ________, causing output to ________. a. negative; fall b. positive; fall c. positive; rise d. negative; risearrow_forwardConsider the following income/expenditure diagram in the simple Keynesian model. If taxes, T, were increased, then Group of answer choices A) The Y = C+S+T line would shift to the right, and equilibrium Y would increase. B) the C+I+G line would shift downward, and equilibrium Y would decrease. C) The Y = C+S+T line would shift to the left, and equilibrium Y would decrease. D) neither of the lines would shift, and equilibrium Y would stay the same. E) the C+I+G line would shift upward, and equilibrium Y would increase.arrow_forward
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