BuyFindarrow_forward

Brief Principles of Macroeconomics...

8th Edition
N. Gregory Mankiw
ISBN: 9781337091985

Solutions

Chapter
Section
BuyFindarrow_forward

Brief Principles of Macroeconomics...

8th Edition
N. Gregory Mankiw
ISBN: 9781337091985
Textbook Problem

The idea that economic downturns result from an inadequate aggregate demand for goods and services is derived from the work of which economist?

a. Adam Smith

b. David Hume

c. David Ricardo

d. John Maynard Keynes

To determine

The economist who derived that the economic downturns result from an inadequate aggregate demand for goods and services.

Explanation

The demand comes from all the economic agents such as households, firms, and the government. The demand depends on the price level of the economy. The increase and decrease in the price level determines the level of demand in the economy. The aggregation of all the individual demands in the economy is known as the aggregate demand. Thus, the aggregate demand explains the relationship between the general price level and the level of real GDP demanded in the economy by economic agents such as households, firms, and the government.

Option (d):

The work of John Maynard Keynes explains that when there is an inadequate aggregate demand in the economy, it will lead to the excess supply of goods and services for a while; this will lead the firms to control and reduce their production to cope with the inadequate aggregate demand in the economy. Thus, the firms will reduce the number of workers and would lay off the excess workers with them. This reduces the total output of the economy and the money income of the workers, which will further lead to lower aggregate demand and fall in the output, in turn leading to economic downturn in the economy. Therefore, option ‘d’ is correct.

Option (a):

The aggregate demand and its fluctuations in causing the economic downturns were developed by the famous economist John Maynard Keynes...

Still sussing out bartleby?

Check out a sample textbook solution.

See a sample solution

The Solution to Your Study Problems

Bartleby provides explanations to thousands of textbook problems written by our experts, many with advanced degrees!

Get Started

Additional Business Solutions

Find more solutions based on key concepts

Show solutions add

Why do economists oppose policies that restrict trade among nations?

Principles of Microeconomics (MindTap Course List)

Explain the major stages of team development.

Foundations of Business (MindTap Course List)

Name some users of accounting information.

Financial & Managerial Accounting

Financial statements are based on generally accepted accounting principles (GAAP) and are audited by CPA firms....

Fundamentals of Financial Management, Concise Edition (with Thomson ONE - Business School Edition, 1 term (6 months) Printed Access Card) (MindTap Course List)