MACROECONOMICS FOR TODAY
10th Edition
ISBN: 9781337613057
Author: Tucker
Publisher: CENGAGE L
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Question
Chapter 16.A, Problem 3SQP
(a)
To determine
Economy in equilibrium with inflationary gap- Classical and Keynesian view.
(b)
To determine
Long-run equilibrium.
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Students have asked these similar questions
In a carefully labelled diagram, draw an economic equilibrium in the Keynesian range of the aggregate supply curve.
2. Describe a situation that would cause the AD curve to shift to the right.
3.Draw the new AD curve in your diagram above and mark the new equilibrium.
consider that our recent recession seems to demonstrate that expenditures and incomes depend on each other. If markets do not self-adjust, how can a decline in spending lead to a negative process that ruins an economy? (Consider implications of gaps in the "Keynesian Cross" and/or the "Aggregate Demand/Aggregate Supply Diagram" to illustrate your points.)
When in macroeconomics an economy ‘overheats’ it is observed that aggregate demand exceeds national income at the full employment output level. Within a ‘Keynesian cross’ framework this overheating is described as which of the following:
(a) A Goldilocks effect;
(b) A hyperinflation;
(c) A recessionary gap;
(d) An inflationary gap
Please illustrate the correct answer via a diagram.
Chapter 16 Solutions
MACROECONOMICS FOR TODAY
Ch. 16.3 - Prob. 1.1YTECh. 16.3 - Prob. 2.1YTECh. 16.3 - Prob. 2.2YTECh. 16.A - Prob. 1SQPCh. 16.A - Prob. 2SQPCh. 16.A - Prob. 3SQPCh. 16.A - Prob. 4SQPCh. 16.A - Prob. 1SQCh. 16.A - Prob. 2SQCh. 16.A - Prob. 3SQ
Ch. 16.A - Prob. 4SQCh. 16.A - Prob. 5SQCh. 16.A - Prob. 6SQCh. 16.A - Prob. 7SQCh. 16.A - Prob. 8SQCh. 16.A - Prob. 9SQCh. 16.A - Prob. 10SQCh. 16.A - Prob. 11SQCh. 16.A - Prob. 12SQCh. 16.A - Prob. 13SQCh. 16.A - Prob. 14SQCh. 16.A - Prob. 15SQCh. 16 - Prob. 1SQPCh. 16 - Prob. 2SQPCh. 16 - Prob. 3SQPCh. 16 - Prob. 4SQPCh. 16 - Prob. 5SQPCh. 16 - Prob. 6SQPCh. 16 - Prob. 7SQPCh. 16 - Prob. 8SQPCh. 16 - Prob. 9SQPCh. 16 - Prob. 10SQPCh. 16 - Prob. 11SQPCh. 16 - Prob. 12SQPCh. 16 - Prob. 1SQCh. 16 - Prob. 2SQCh. 16 - Prob. 3SQCh. 16 - Prob. 4SQCh. 16 - Prob. 5SQCh. 16 - Prob. 6SQCh. 16 - Prob. 7SQCh. 16 - Prob. 8SQCh. 16 - Prob. 9SQCh. 16 - Prob. 10SQCh. 16 - Prob. 11SQCh. 16 - Prob. 12SQCh. 16 - Prob. 13SQCh. 16 - Prob. 14SQCh. 16 - Prob. 15SQCh. 16 - Prob. 16SQCh. 16 - Prob. 17SQCh. 16 - Prob. 18SQCh. 16 - Prob. 19SQCh. 16 - Prob. 20SQ
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Similar questions
- The school of thought that emphasizes the natural tendency for an economy to move toward a full-employment equilibrium is known as thea. Keynesian school.b. supply-side school.c. noninterventionist school.d. classical school.arrow_forwardWhich 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.arrow_forwardIf markets do not self-adjust, how can a decline in spending lead to a negative process that ruins an economy? (Consider implications of gaps in the "Keynesian Cross" and/or the "Aggregate Demand/Aggregate Supply Diagram" to illustrate your points.)arrow_forward
- Respond to the following in a minimum of 175 words: Explain the shape of aggregate demand curve. How do Classical and Keynesian economists differ in their view of the aggregate supply curve? Discuss how the economy returns to equilibrium in response to changes in aggregate demand (AD) and aggregate supply (AS) in both the short run and long run.arrow_forwardAt the end of the fourth quarter of 2022 (December 2022) was the United States economy operating in the Keynesian, intermediate, or neoclassical portion of the economy’s Short Run Aggregate Supply Curve? Explain. Compare the overall state of the economy at the end of 2022 (fourth quarter) to the fourth quarter of 2019 which you described in your Chapter 11 Discussion. * For the Chapter 11 discussion for the fourth quarter of 2019, I said that the economy was acting in neoclassical. This was my discussion post from last time: Potential GDP is defined as the amount of real GDP an economy can produce by fully employing its existing levels of labor, physical capital, and technology in the context of its existing market and legal institutions. The non-cyclical natural rate of unemployment is defined as the lowest level that a healthy economy can sustain without creating inflation. Before the spread of the pandemic, the state of the U.S. economy at the end of the 2019 before the spread of…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
- 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.arrow_forwardThe country of Merryville has an unemployment rate that is greater than the natural rate of unemployment. Using a correctly labeled graph of aggregate demand and aggregate supply, show the current equilibrium real gross domestic product, labeled YC, and price level in Merryville, labeled PLC. The president of Merryville is receiving advice from an economic adviser who advises the president to decrease personal income taxes. How would such a decrease in taxes affect aggregate demand? Explain. The government of Merryville increases spending on goods and services by $200 billion, which is financed by borrowing. If the marginal propensity to consume in Merryville is 0.75: Calculate the multiplier What is the maximum possible change in real gross domestic product (GDP) that could result from the $200 billion increase in government spending?arrow_forward#1b: At the end of the fourth quarter of 2022 (December 2022) was the United States economy operating in the Keynesian, intermediate, or neoclassical portion of the economy’s Short Run Aggregate Supply Curve? Explain. Compare the overall state of the economy at the end of 2022 (fourth quarter) to the fourth quarter of 2019 which you described in your Chapter 11 Discussion.arrow_forward
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