Chat with AIExam 5: Introduction to Macroeconomics
List and briefly explain the three market arenas.
(37) 
VerifiedThe three market arenas are the goods-and-services market, the labor market, and the money market. The goods-and-services market includes purchases of goods and services by households from firms or firms buying goods and services from each other. The labor market is where both firms and government purchase labor from households. Households supply the labor and government and firms demand labor. In the money market households purchase stocks and bonds from firms. Households buy these instruments with the expectation that they will earn income in the form of dividends or capital gains from stocks and interest on bonds.
Explain what sticky prices are in terms of macroeconomic equilibrium.
(34) VerifiedSticky prices are prices that do not always adjust rapidly to maintain equality between quantity supplied and quantity demanded.
Sticky prices and wages are often cited as an example of market inefficiency. For example, many firms, during recessions, lay off workers. Yet many of these same firms are reluctant to begin hiring, even as the economic situation improves. Can you provide an explanation for this behavior that might demonstrate that it is rational?
(38) VerifiedFirms may be reluctant to lower wages out of fear that they may lose their best workers. Therefore, they may attempt to cut their payroll costs by laying workers off instead of cutting wages. They may be reluctant to hire workers even as the economic situation improves because they may be suspicious that the recovery is truly under way.
What are the basic tenets of Keynesian theory that help explain the level of employment?
(32) How do Classical economists and Keynesian economists differ in their perceptions of how well markets and prices function?
(37) What might be some Keynesian prescriptions to get the economy out of an economic slump?
(40) Explain what is meant by deflation. Explain the impact that it might have on the value of assets.
(42) Explain why a cut in spending to bring down inflation during a period of stagflation does not solve all macroeconomic problems.
(35) Assume that the demand for computer programmers drops precipitously. Explain using Keynesian reasoning why this will cause unemployment.
(32) Explain the two main types of government policies that can be used to influence the macroeconomy.
(37) Define stagflation and explain why it undermined faith in the simple Keynesian model.
(39) 
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