MacroEcon Help! Couldn\'t locate answers in the textbook/ don\'t understand Keyn
ID: 1155688 • Letter: M
Question
MacroEcon Help! Couldn't locate answers in the textbook/ don't understand Keynesian.
2. Which of the following is NOT true about the aggregate demand curve?
The aggregate demand curve considers the entire circular flow of income.
10. The Keynesian portion of the short-run aggregate supply (SRAS) curve implies
12. Keynesian economists would likely argue that the classical model is which of the following?
16. Keynes argued that because of sticky prices and wages
the long-run aggregate supply curve slopes downward.
the aggregate demand curve is vertical.
17. Planned expenditures equal real disposable income
18. The marginal propensity to consume is
20. In the consumption function model, the 45-degree line represents where
25. In the Keynesian model, a decrease in real autonomous spending results in a more than proportional decrease in real Gross Domestic Product (GDP) because
a. The production possibilities curve determines the slope of the aggregate demand curve. b. The aggregate demand curve shows total planned real expenditures at different price levels. c. Changes in the economic conditions in other countries will lead to a shift of the aggregate demand curve. d.The aggregate demand curve considers the entire circular flow of income.
Explanation / Answer
(2) (a)
Slope of aggregate demand curve is determined by the slopes of IS and LM curves, not by the PPF.
(10) (b)
Keynesian range of SRAS curve is horizontal, signifying no changes in price level or wages (Sticky prices).
(12) (a)
Since Classical theory assumes full flexibility of prices and wages, Keynesians consider the Classical theory to be a long run model only.
(16) (a)
(17) (c)
Only on the 450 line, planned aggregate expenditure equals real GDP (output or income).
(18) (c)
(20) (b)
On the 450 line, Real disposable income equals Planned consumption. Since Savings = Disposable income - Consumption, this means that Savings = 0 along 450 line.
(25) (c)
This is the Spending Multiplier effect which means that a N% decrease (increase) in autonomous spending will result in a higher-than N% decrease (increase) in real GDP.
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