Exploring Macroeconomics
7th Edition
ISBN: 9781285859446
Author: Sexton, Robert L.
Publisher: Cengage Learning
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Chapter 15, Problem 15P
To determine
The assumption of the Keynesian on wage and price rigidity best corresponds with the steepest portion of the
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Students have asked these similar questions
The graph above refers to a significant increase in individual income taxes, taking them to their highest level in 50 years. Which of the following is likely to result?
a) macroeconomic supply will decrease in the short run
b) the economy will experience lower economic growth
c) inflationary pressures will be mild
d) cyclical unemployment will decrease
Which of the following describes the use of Keynesian macroeconomic policy to resolve an inflationary gap problem in the economy?
a) Unemployment, resulting from the short-run product markets equilibrium being below Long-run Aggregate Supply (LRAS), causes wages to decline, which increases short-run Aggregate Supply (AS), until long-run equilibrium is attained at full employment level of income and a lower price level.
b) Government spending is increased, increasing Aggregate Demand (AD) to a level sufficient to attain long-run equilibrium at full employment level of income and a higher price level.
c) In attempting to produce beyond the economy's natural level of GDP, producers bid up wages and prices of other resources, causing the short-run Aggregate Supply (AS) to decrease to the point where long-run equilibrium is restored.
d) Taxes are increased reducing Aggregate Demand (AD) to a level consistent with full employment.
The short-run quantity of output supplied by firms will exceed the natural level of output when the actual price level ———-that people expected.
Chapter 15 Solutions
Exploring Macroeconomics
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- In a carefully labelled diagram, draw an economic equilibrium in the Keynesian range of the aggregate supply curve.arrow_forwardWhich of the following would cause the Aggregate Supply curve to move from AS to AS2 in the graph below? A) A general increase in energy and labor cost for businesses. B) A general decrease in labor cost for businesses. C) An increase in productivity. D) A federal government increase in spending.arrow_forwardAccording to the supply-side economics principles promoted by President Ronald Reagan, economic growth would occur when Group of answer choices business was regulated by antitrust policy. investment in capital goods was decreased. corporate business taxes were reduced. unemployment benefits were increased.arrow_forward
- The Keynesian economic framework is based on an assumption that: A) an increase in government spending will cause the aggregate demand curve to shift to the left. B) people can afford a high level of government services. C) prices and wages are sticky and do not adjust rapidly. D) an increase in government spending will cause the aggregate demand curve to shift to the left.arrow_forwardThe aggregate supply curve is probably better thought of as a price/output response curve. Select one: True Falsearrow_forwardClassical economists think prices and quantities respond to supply and demand and the economy produces its potential output over time. However, Keynesian economists believe pricing and wage rigidities may lower the economy's long-term equilibrium output. What is the Price-wage rigidity?arrow_forward
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