Principles of Economics 2e
2nd Edition
ISBN: 9781947172364
Author: Steven A. Greenlaw; David Shapiro
Publisher: OpenStax
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Textbook Question
Chapter 25, Problem 2SCQ
In a Keynesian framework, using an AD/AS diagram, which of the following government policy choices offer a possible solution to recession? Which offer a possible solution to Inflation?
- A tax Increase on consumer income.
- A surge in military spending.
- A reduction in (axes for businesses that Increase investment.
- A major Increase in what the U.S. government spends on healthcare.
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Students have asked these similar questions
In a Keynesian economy, please show and explain how would reducing marginal tax rates affect income and price levels in the name of AD-AS model.
In the Keynesian model, which of the following events lead to an increase in aggregate demand?
(This is a multiple answer question. One of more options may be correct)
a.
An increase in the sales tax
b.
A new infrastructure project by the Federal government
c.
An increase in value of the Euro relative to the US-Dollar
d.
A drop in business confidence.
The Keynesian view of the AD/AS model states that when beginning from potential output equilibrium, any increase in AD will :
Chapter 25 Solutions
Principles of Economics 2e
Ch. 25 - In the Keynesian framework, which of the following...Ch. 25 - In a Keynesian framework, using an AD/AS diagram,...Ch. 25 - Use the AD/AS model to explain bow an inflationary...Ch. 25 - Suppose the U.S. Congress cuts federal government...Ch. 25 - How would a decrease in energy prices affect the...Ch. 25 - Does Keynesian economics require government to set...Ch. 25 - List three practical problems with the Keynesian...Ch. 25 - Name some economic events not related to...Ch. 25 - Name some government policies that cod cause...Ch. 25 - From a Keynesian point of view, which is more...
Ch. 25 - Why do sticky wages and prices increase the impact...Ch. 25 - Explain what economists mean by menu costs.Ch. 25 - What tradeoff does a Phillips curve show?Ch. 25 - Would you expect to see long-run data trace out a...Ch. 25 - What is the Keynesian prescription for recession?...Ch. 25 - How did the Keynesian perspective address the...Ch. 25 - In its recent report, The Conference Boards Global...Ch. 25 - What may happen if growth in China continues or...Ch. 25 - Does it make sense that wages would be sticky...Ch. 25 - Suppose the economy is operating at potential GDP...Ch. 25 - Do you think the Phillips curve is a useful tool...Ch. 25 - Return to the table from the Economic Report of...Ch. 25 - Explain what types of policies the federal...
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Similar questions
Hayek 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?
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Hayek says that markets will heal themselves and that government should not intervene. How does the AD-AS model reflect Hayeks idea that governments cannot increase real GDP beyond the level that the free market economy is able to produce?
arrow_forward
In the Keynesian framework, which of the following events might cause a reaction ?
a) A large increase in the price of the homes people own
b) Rapid growth in the economy of a major trading partner
c) The development of a major new technology offers profitable opportunities for business
d) The interest rate rises
e) The good imported from a major trading partner becomes much less expensive
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Using the AD-AS model, if consumers and business become more optimistic about the future direction of the economy and increase spending, then:
a-long-run aggregate supply will decrease.
b-aggregate demand will decrease.
c-aggregate demand will increase.
d-long-run aggregate supply will increase.
arrow_forward
Using the AD/AS model, show how fear of a recession is expected to affect an economy experiencing too much inflation
arrow_forward
using the Keynesian AD-AS diagram how can the economy be in a state of equilibrium at any level of real output where AD intersects AS
arrow_forward
Does the graph above reflect a Classical Model or a Keynesian Model? How do you know? What is happening in this economy in the short run?
arrow_forward
In the Keynesian framework, for each of the following events which might cause a recession and/or inflation? Explain using Aggregate Demand/ Aggregate Supply.
a. A large increase in the price of the homes that people own
b. Rapid growth in the economy of a major trading partner
c. The development of a major new technology offers profitable opportunities for business
d. The interest rate rises
e. The good imported from a major trading partner becomes much less expensive. 
arrow_forward
What policy changes would Keynes recommend to counteract a recession?
arrow_forward
According to macroeconomic theory, a concurrent increase in AD and decrease in AS will cause __________.
Group of answer choices
deflation
economic recession
economic boom
inflation
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Keynes advocated the use of fiscal and monetary policy to stabilize an economy? When are the effects of these policies most beneficial? Select all that apply.
Select one or more:
In the short run
When the economy is operating at full employment
When the economy is operating significantly above full employment
When the economy is operating significantly below full employment
In the long run
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THE SIMPLE KEYNESIAN MACROECONOMIC MODEL CONCLUDES THE FOLLOWING ABOUT THE SOUTH AFRICAN ECONOMY
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