Exam 12: Keynesian Business Cycle Analysis: Non Market Clearing Macroeconomics

In setting the price of its product,a monopolistic competitor sets the price equal to its marginal cost plus an amount called the

An easy fiscal policy generates

The reason for different effects of an anticipated fiscal policy on the full-employment output in the Keynesian and Classical models is

a.Draw a figure,using the Keynesian IS-LM framework,of an economy in recession. b.Now suppose the IS curve shifts to the right far enough that if the real interest rate is unchanged,output will increase beyond full employment.If the Central Bank's goal is to move output to its full-employment level,what must happen to the real interest rate? What is the effect on the price level? c.Suppose,before the Bank can act,that the government announces a restrictive fiscal policy,shifting the IS curve to the left relative to its position in part (b).What is the Bank likely to do (relative to what it would do if fiscal policy wasn't restrictive)if its goal is to target full-employment output? What happens to the real interest rate relative to what it is in part (b)?

The equation Y = Y* + b(P - Pᵉ),where Y is output,Y* full-employment output,P and Pᵉ are price and expected price levels,respectively,and b is a parameter,

According to the Keynesian IS-LM model,what is the effect of each of the following on output,the real interest rate,employment,and the price level? Distinguish between the short run and the long run. a.expected inflation declines b.wealth declines c.labour supply increases due to a change in demographics d.the future marginal product of capital increases

An anticipated change in monetary policy does not have any effect on output because

The recent experience in Japan was characterized by ________ monetary policy and ________ fiscal policy.

Which of the following statements about the behaviour of the real wages in the business cycles is true?

The main difference between the Keynesian and Classical models is that

Which of the following is true about the short run effects of a contractionary monetary policy in Keynesian model?

Which one of the following describes Keynesians' rationale for the positively sloped SRAS curve?

In the Keynesian model,an increase in government purchases affects output by

In the Keynesian model in the long run,an increase in the money supply will

The upward-sloping short-run aggregate supply curve implies that

Explain how the Keynesian model of business cycles is consistent with the business cycles facts.

When consumption and investment is reduced because of the higher interest rates induced by the government expansionary fiscal policy,the effect is called

Which of the following is true about the long run effects of a contractionary monetary policy in Keynesian model?

Explain the effects of an anticipated fiscal policy on the long-run output and price level.Discuss how Keynesian and the Classical models differ in analyzing the effect.

In the Keynesian model in the short run,the amount of employment is determined by the effective labour demand curve and the level of