Legislation proposes that the government should use
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Chapter 26 Solutions
PRINCIPLES OF ECONOMICS
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- Would it make sense to argue that rational expectations economics is an extreme version of neoclassical economics? Explain.arrow_forwardEconomists from all theoretical persuasions criticized the American Recovery and Reinvestment Act. The Stimulus Package was arguably a Keynesian measure so why would a Keynesian economist be critical of it? Why would neoclassical economists be critical?arrow_forwardCompare and contrast the use of government spending changes versus tax changes as a means of influencing the course of the economy. Is one or the other preferable in specific situations? What are the short-run and long-run implications? What solutions do you recommend? (Think beyond the scope of the video and keep it to economical thought.) What would a Neoclassical economist say about your solutions? What would a Keynesian economist say about your solutions? Apply economic theories and models to support your responsearrow_forward
- If the economy has rational expectations and the model is sticky price model. Could you explain why the following statement true in macroeconomics?arrow_forwardWhat is the difference between the Keynesian zone, neoclassical zone, and intermediate zone in the AD/AS model? For each, predict the impact that an increase in aggregate demand would have on the price level relative to real GDP in each of those zones. How does the AD/AS model explain economic growth, recessions, as well as changes in unemployment and inflationary pressures?arrow_forwardSummarize the Neoclassical model: A. The neoclassical model is built on the importance of aggregate demand as a cause of business cycles and a degree of wage and price rigidity, and thus does a sound job of explaining many recessions and why cyclical unemployment rises and falls. B. The neoclassical model emphasizes aggregate supply by focusing on the underlying determinants of output and employment in markets, and thus tends to put more emphasis on economic growth and how labor markets work. C. The neoclassical model is built on the importance of aggregate supply as a cause of business cycles and a degree of wage and price rigidity, but does a poor job of explaining many recessions and why cyclical unemployment rises and falls.arrow_forward
- Identify and briefly explain the neoclassical argument and the key building blocks of neoclassical approach. Briefly explain what is meant by the term "menu costs" from a macroeconomic perspective?arrow_forward4.What is meant by the term neoclassical counterrevo-lution? What are its principal arguments, and how valid do you think they are? Explain your answer.arrow_forwardExplain what is meant by ‘macroeconomics’ and why some economists think that it is different to standard neoclassical economics. explain with graphs please.arrow_forward
- 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. * 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_forwardIn Spring 2020, the U.S. economy once again found itself in an economic crisis, this time due to the COVID-19 pandemic. Which approach did the U.S. government follow in regards to the economy—Keynesian or Neoclassical? Explain.arrow_forwardIf the economy is inequilibrium around the neoclassical zone of the Aggregate Supply curve, a/an ___ policy will lead to __ prices.arrow_forward
- Principles of Economics 2eEconomicsISBN:9781947172364Author:Steven A. Greenlaw; David ShapiroPublisher:OpenStax