EBK MACROECONOMICS
10th Edition
ISBN: 9780134896571
Author: CROUSHORE
Publisher: VST
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Chapter 12, Problem 2AP
To determine
Comparative study of
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Elaborate on how one or more of the microeconomic components, namely consumption, investment, supply and demand for money influence macroeconomic outcomes and formulations of the following macroeconomic theories:
Solow Growth Model
The Mundell-Fleming model
Neoclassical Model of Investment
Use mathematical equations and graphs where necessary.
Explain why classical assumptions are not realistic?
Explain why a supply shocks is most of the time believed to be temporary? And does not result in government requiring to do any special policy to rectify the problem.
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- Why, in general, do shocks force people to make changes? Give at least two examples from your own experience.arrow_forwardHow do Classical economists and Keynesian economists differ in their perceptions of how well markets and prices function? List and briefly explain the nature and functions of three market arenas. Which are the four components of the macroeconomy? Explain the interaction between these components through a circular flow diagram. Draw a graph of a business cycle. Label and explain each phase of the business cycle. Define the following concepts: Sticky Prices Expansion and contraction Inflation, Deflation and Hyperinflation Fiscal Policy and Monetary Policyarrow_forwardHayek says that markets will heal themselves and that government should not intervene. How does the AD-AS model reflect Hayek’s idea that governments cannot increase real GDP beyond the level that the free market economy is able to produce? Do you believe that the Hayek’s classical AD-AS model explain the factors that cause changes (shifts) in AS realistically? Why or why not?arrow_forward
- In the Keynesian model, if there is a sudden rise in the aggregate demand curve, in the short run, it will cause a inflation b deflation c increase in output d a and carrow_forwardIn the basic New Keynesian model. suppose that the anticipated future rate of inflation goes up due to a future increase in energy prices. Determine the effects and explainarrow_forwardIs Keynesian economics relevant in today's new normal? In what way? Explain...arrow_forward
- According to the neoclassical model, when the Federal Reserve implements expansionary monetary policy, a aggregate demand will decrease, price level will decrease, and output will remain the same. b aggregate demand will decrease, price level will decrease, and output will increase. c aggregate demand will increase, price level will increase, and output will remain the same. d aggregate demand will increase, price level will increase, and output will increase.arrow_forwardIs it possible for there to be inflation present in the economy and still witness a decline in a large number of goods? If so, how and why is this possible?arrow_forwardWhich of the following is true according to the Neo-Classical macroeconomic model? A) In the long-run equilibrium, the unemployment rate is zero percent. B) Government interventions are required and helpful. C) A capitalist economy automatically adjusts to the full-employment equilibrium in the long-run. D) In the long-run equilibrium, aggregate demand is greater than aggregate supply...arrow_forward
- Do you believe that the Hayek's classical AD-AS model explains the factors that cause changes (shifts) in AS realistically? Why or Why not?arrow_forwardAccording to the Keynesian model, which answer might cause a recession but wouldn't cause inflation for Country X. O a decrease in interest rates O a decrease in a major trading partners export prices a major trading partner's economic slowdown O an increase in domestic investmentarrow_forwardHayek says that markets will heal themselves and that government should not intervene. How does the AD-AS model reflect Hayek’s idea that governments cannot increase real GDP beyond the level that the free market economy is able to produce? Do you believe that the Hayek’s classical AD-AS model explain the factors that cause changes (shifts) in AS realistically? Why or why not?arrow_forward
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