If M (the money supply) grows, then we know that aggregate demand will ceteris p

Question

If M (the money supply) grows, then we know that aggregate demand will ceteris pant If the government spends $10,000 on light bulbs in 2016. assuming the MPC for all individuals is 68. according to Keynes, total spending in the economy will increase by: The following graph to answer question 39. For Keynes, the market economy is not self-regulating. If the above market at A Do represented our economy at present. Keynes would recommend: According to the Paradox of Thrift: Expansionary fiscal policy actions include government spending and/or taxes, while contractionary fiscal policy actions include government spending and/or taxes. Which of the following is an example of crowding out? Due to the incentives faced by politicians, higher priority is placed on fighting. The Federal Reserve is the central bank of the United States. Per class discussion, what is the most important function of the FED? Ml is comprised of currency held outside banks - traveler's checks + Ml Open market operations arc the Suppose the FED buys $1,000 worth of Treasury securities from Bank A, and the current required reserve ratio is 20%. What will the total increase in Ml equal? 1000 If in the previous question, the required reserve ratio were lowered to 10%. then the total increase in Based on your answer to question 47 and 48. it is obvious that lowering the required reserve ratio would serve to:

Explanation / Answer

40)

The paradox states that if everyone tries to save more money during times of recession, then aggregate demand will fall and will in turn lower total savings in the population because of the decrease in consumption and economic growth. The paradox is, narrowly speaking, that total savings may fall even when individual savings attempt to rise, and, broadly speaking, that increases in savings may be harmful to an economy.[3] Both the narrow and broad claims are paradoxical within the assumption underlying the fallacy of composition, namely that what is true of the parts must be true of the whole. The narrow claim transparently contradicts this assumption, and the broad one does so by implication, because while individual thrift is generally averred to be good for the economy, the paradox of thrift holds that collective thrift may be bad for the economy.This paradox can be explained by analyzing the place, and impact, of increased savings in an economy. If a population saves more money (that is the marginal propensity to save increases across all income levels), then total revenues for companies will decline. This decrease in economic growth means fewer salary increases and perhaps downsizing. Eventually the population's total savings will have remained the same or even declined because of lower incomes and a weaker economy. This paradox is based on the proposition, put forth in Keynesian economics, that many economic downturns are demand based.

42) gov spending reduces private spending

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