Exam 8: Keynesian System Iv: Aggregate Supply and Demand

The United States and other industrialized countries experienced rising inflation accompanied by a recession during the 1970s.This phenomenon was described as (a)

According to the Keynesian fixed wage theory,real wages should be

During the recession of 1990-1991,interest rates in the U.S.dropped by nearly two percentage points while output rose and inflation fell.Can you explain this result in the Keynesian model? Show your explanation graphically using the IS-LM and AD-AS models.

Stagflation can be explained by

Do workers and firms care more about wage stability or employment stability? Why? Explain what both Keynesian wage theories suggest.

The classical theory of aggregate supply where markets are perfectly flexible

The Keynesian labor supply function is shown as

The aggregate supply schedule is steeper where the money wage is more variable than where the money wage is fixed because the rise in the money wage in the

Which of the following statements is correct?

Compared to the fixed-price/fixed-wage model,in the Keynesian model with a flexible price but fixed wage,an increase in the money stock will cause output to rise by

Which of the following variables will shift the classical aggregate demand curve?

If the Keynesian model is correct,what should be the correlation between interest rates,the price level,real wages,and output over the business cycle? Provide graphs of the labor market,AD/AS,and IS/LM to illustrate.

In addition to consumption being a function of income,suppose that it is also a function of interest rates.Now,lower interest rates make borrowing to consume easier,encouraging overall consumption.

The difference between the Keynesian and classical labor supply functions is that in the Keynesian version

Why is the IS-LM model a model of aggregate demand? Illustrate this using an IS-LM graph.

If business cycles are caused by changes in aggregate demand,you would expect to see

In the case of an increase in government spending where the price level varies while the money wage is fixed,output

Suppose the government want to increase aggregate demand without increasing interest rates.You would recommend

The classical labor supply function is shown as

In the face of an increase in oil prices,if the government's primary objective is to keep prices from falling,then policymakers should