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Economics

David C. Colander

Chapter 26

The Keynesian Short-Run Policy Model: Demand-Side Policies - all with Video Answers

Educators

Chapter Questions

01:02

Problem 1

According to Keynesians how could the economy's output deviate from its potential? $(L O 26-1)$

Kaylee Mcclellan
Kaylee Mcclellan
Numerade Educator
04:47

Problem 2

Why might deflation be a problem for an economy? $(L O 26-1)$

Samit Deshmukh
Samit Deshmukh
Numerade Educator
03:36

Problem 3

Why does the paradox of thrift suggest that government needs to intervene in a recession? $(L O 26-1)$

Haricharan Gupta
Haricharan Gupta
Numerade Educator
01:37

Problem 4

Why, in principle, would one expect the $A D$ curve to be vertical? $\quad(L O 26-2)$

Yingtai Xiao
Yingtai Xiao
Numerade Educator
08:24

Problem 5

Explain how a rise in the price level affects aggregate quantity demanded with the: $(L O 26-2)$
a. Interest rate effect.
b. International effect.
c. Money wealth effect.

KM
Kanishk Mishra
Numerade Educator
01:13

Problem 6

What are five factors that cause the $A D$ curve to shift? $(L O 26-2)$

Kaylee Mcclellan
Kaylee Mcclellan
Numerade Educator
01:39

Problem 7

What dynamic feedback effects can offset the interest rate, international, and money wealth effects? $(L O 26-2)$

Kaylee Mcclellan
Kaylee Mcclellan
Numerade Educator
03:01

Problem 8

What will likely happen to the slope or position of the $A D$ curve in the following circumstances? $(L O 26-2)$
a. The exchange rate changes from fixed to flexible.
b. A fall in the price level doesn't make people feel richer.
c. A fall in the price level creates expectations of a further-falling price level.
d. Income is redistributed from rich people to poor people.
e. Autonomous exports increase by 20 .
f. Government spending decreases by 10 .

Jesse Leija
Jesse Leija
Numerade Educator
01:13

Problem 9

What are two factors that cause the SAS curve to shift? $(L O 26-3)$

Kaylee Mcclellan
Kaylee Mcclellan
Numerade Educator
03:19

Problem 10

What will likely happen to the $S A S$ curve in each of the following instances? $(L O 26-3)$
a. Productivity rises 3 percent; wages rise 4 percent.
b. Productivity rises 3 percent; wages rise 1 percent.
c. Productivity declines 1 percent; wages rise 1 percent.
d. Productivity rises 2 percent; wages rise 2 percent.

Daniel Cisneros
Daniel Cisneros
Numerade Educator
01:37

Problem 11

Why is the $L A S$ curve vertical? $(L O 26-3)$

Yingtai Xiao
Yingtai Xiao
Numerade Educator
09:54

Problem 12

What will happen to the position of the SAS curve and/or $L A S$ curve in the following circumstances? $(L O 26-3)$
a. Available factors of production increase.
b. A civil war occurs.
c. Wages that were fixed become flexible, and aggregate demand increases.

Md.Daniyal Arshad
Md.Daniyal Arshad
Numerade Educator
01:02

Problem 13

If an economy is in short-run equilibrium that is below potential, what forces will bring the economy to long-run equilibrium? $(L O 26-4)$

Kaylee Mcclellan
Kaylee Mcclellan
Numerade Educator
03:37

Problem 14

Moore's law states that every 18 months, the computing speed of a microchip doubles. $(L O 26-4)$
a. What effect does this likely have on the economy?
b. Explain your answer using the $A S / A D$ model.

Ashley Volpe
Ashley Volpe
Numerade Educator
05:23

Problem 15

Congratulations! You have been appointed an economic policy adviser to the U.S. president. You are told that the economy is significantly below its potential output and that the following will happen next year:
World income will fall significantly and the price of oil will rise significantly. (The United States is an oil importer.) $(L O 26-4)$
a. What will happen to the price level and output? Using the AS/AD model, demonstrate your predictions graphically.
b. What policy might you suggest to the government?

Natalie Britton
Natalie Britton
Numerade Educator
01:59

Problem 16

What fiscal policy actions would you recommend in the following instances? $(L O 26-4)$
a. The economy begins at potential output, but foreign economies slow dramatically.
b. The economy has been operating above potential output and inflationary pressures rise.
c. A new technology is invented that significantly raises potential output.

Banhishikha Sinha
Banhishikha Sinha
Numerade Educator
02:27

Problem 17

How can a falling price level destabilize an economy? $(L O 26-5)$

Majid Borumand
Majid Borumand
Numerade Educator
03:05

Problem 18

Why is knowing the level of potential output important to designing appropriate fiscal policy? $(L O 26-5)$

Md.Daniyal Arshad
Md.Daniyal Arshad
Numerade Educator
00:26

Problem 19

Why is macro policy more difficult than the simple model suggests? $\quad(L O 26-5)$

David Collins
David Collins
Numerade Educator
03:05

Problem 20

Why is countercyclical fiscal policy difficult to implement? $\quad(L O 26-5)$

Md.Daniyal Arshad
Md.Daniyal Arshad
Numerade Educator