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

To use fiscal expansion to fight a recession without discouraging investment, we must have ________ monetary policy and ________ fiscal policy

Unanticipated increase in the government expenditures would

According to Keynesian theory, SRAS curve is positively sloped, because

The main difference between classical economists and the Keynesians in explaining the SRAS curve is that

In the Keynesian model in the long run, an increase in the money supply will cause ________ in the real interest rate and ________ the price level.

The following equations describe a Keynesian model of the economy: C^d = 500 - 0.5(Y - T) - 100r I^{d =} 350 - 100r L = 0.5Y - 200i π^e = 0.05, G = T = 200, Y = 1850 M = 3560 a. Find the full-employment equilibrium values of the real interest rate, consumption, investment, and the price level. b. Suppose government purchases decline to 175, with no change in taxes. What happens to the real interest rate, output, consumption, and investment in the short run (in which the price level is fixed)? What happens in the long run to the real interest rate, consumption, investment, and the price level? c. Suppose instead that government purchases rise to 225, with no change in taxes, starting from the equilibrium in part (a). What happens to the real interest rate, output, consumption, and investment in the short run (in which the price level is fixed)? What happens in the long run to the real interest rate, consumption, investment, and the price level?

In the Keynesian model, wages and prices are

Anticipated changes in the aggregate demand, in the Keynesian model,

The short run aggregate supply curve is

According to Keynesians, the primary reason money is not neutral is

Using the Keynesian model, the effect of an increase in corporate taxes would be to cause ________ in the real interest rate and ________ in output in the short run.

In the Keynesian model in the long run, a decrease in taxes causes the price level to ________ and the real interest rate to ________.

An unanticipated increase in the money supply would

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

A problem with the use of aggregate demand management to stabilize the business cycle is that

In the Keynesian model, money is

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

The crowding-out effect will probably occur, when

In the Keynesian model, a decrease in the money supply would cause prices to ________ in the short run and ________ in the long run.

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