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

In the Keynesian model, the difference between no intervention by the government during a recession and intervention using expansionary monetary or fiscal policy is that no intervention will return the economy to its equilibrium level of output ________ than intervention will and at a ________ price level.

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

The crowing-out effect occurs because of

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

A model in which individual producers act as price setters, because there are only a few sellers and the product they sell is not standardized, is called

The theory that firms will be slow to change their products' prices in response to changes in demand because there are costs to changing prices is called

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

Which of the following statements is false?

According to the menu cost theory, firms will be slow in changing their prices because

In the Keynesian model, short-run equilibrium occurs

Keynesians are skeptical of the classical theory that recessions are periods of increased mismatch between workers and jobs because

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