Keynes believed that prices and wages were rigid or fixed until the economy reaches ______.
a. equilibrium
b. full employment
c. recession
d. expansion
b. full employment
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In the figure above, assume that output is $10.5 trillion, while potential output is $12 trillion. Suppose that a combination of fiscal stimulus and recovery of consumer and business confidence shifts the IS and AD curves, as shown in the figure
The equilibrium real interest rate is ________ percent. A) 3 B) one C) 2.5 D) 2 E) zero
The branch of economics that focuses on outcomes in highly aggregated markets, such as the markets for labor or consumption goods, is called: a. macroeconomics
b. positive economics. c. normative economics. d. microeconomics.
Most economists think that the Keynesian position is that
A) the wage rate will never fall and the price level will never adjust downward if the economy is in a recessionary gap. B) the time required before wages and prices adjust downward is short enough for the economy to be called self-regulating. C) the time required before wages and prices adjust downward is long enough for the economy to exist in a recessionary gap for a long time. D) the time required before wages and prices adjust downward if the economy is in a recessionary gap is rather long, but short enough for the economy to be considered self-regulating.
Aggregate demand is the total quantity of output
A. Demanded at alternative price levels in a given time period. B. Consumers actually buy. C. Producers are willing and able to supply at alternative price levels. D. Demanded if the economy is in equilibrium.