Keynes and his followers believed that capitalism was one economic system that guaranteed full employment. wages and prices in the short run were flexible. the economy could not operate at any level of real Gross Domestic Product (GDP) less than full capacity. there was no guarantee that a capitalist economy would reach a full employment equilibrium.
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Keynes and his followers believed that
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- In a Keynesian framework, which of the following government policy choices offer a possible solution to recession? A tax increase on consumer income. A surge in military spending. A reduction in taxes for businesses that increase investment. A major increase in what the U.S. government spends on healthcare.A country starts in steady state. Due to a lost war, the country has to give up territory containing 50% of its capital stock and 10% of its population. This will cause Group of answer choices the economy to converge to a new higher steady state. the growth rate of output to rise initially as the economy begins to converge to the old steady state. the growth rate of output to rise initially as the economy begins to converge to a new lower steady state. the economy to enter a period of negative growth.Emerging economiesEmerging economies that were growing rapidly, particularly Brazil and Russia, are both now in recession which means the income of the economy is shrinking. Commodity prices have played a considerable role in sending these economies into reverse, although this has been compounded by political developments in these countries.The previous major engine of global growth, China, has also seen its economy slowing. Although still growing at a brisk pace compared with mature western economies, by the double digit standards that China set for itself in past decades it Is unquestionably experiencing slower growth. This has happened at the same time as, and is related to, China rebalancing its economic growth model from reliance on exports and capital investment towards domestic consumption and services. One consequence of this has been lower demand for imported commodifies, which has been one factor depressing global prices, particularly in areas like metals.In contrast to…
- During the severe economic downturn during the great recession the federal government provided an additional $600 per month to those who claimed unemployment. Based on what you know, explain how this aligns with Keynesian economic theory.The following Mundell-Fleming model of a small, open economy will be used in all numerical exercises. It assumes a short-run framework in which prices are constant and output is demand-determined. C = 200 + 0.8(Y − T) I = 500 − 30r NX = 10 − 100e M/P = 50 + Y − 60r r = 2 G = 200 T = 100 M = 4000 P = 2 a.)Suppose that households become less confident about the future and reduce their autonomous level of consumption from 200 to 150. Solve for the new values of e, Y and NX. With the help of graphs, explain very carefully the mechanisms by which a new equilibrium is reached. b.) Suppose that with all exogenous variables at their original values, the autonomous part of money demand increases to 70. Solve for the new values of e, Y and NX. With the help of graphs, explain very carefully the mechanisms by which a new equilibrium is reached. c.) Based on your answers to parts (a) and (b), evaluate the role of floating rates as automatic stabilisers when exogenous shocks hit the economy.Inflation rocketed to record levels throughout 2022, as the war in Ukraine pushed up the price of everyday necessities, including food, energy, and fuel. At the same time, wages have failed to keep pace with the change in everyday costs. War in Europe, political instability, increasing energy bills and cost of living have been an overarching story of the UK economy. In November 2022, the Consumer Price Index (CPI) showed prices were an average of 10.7% higher than they were in the same month a year previously. This figure showed the rate of price rises had slowed, as the CPI for October 2022 was 11.1% - the highest level for 41 years. (a) Discuss what monetary policy the Bank of England may use to control the rising inflation? (200 words max) (b) What are the problems/issues that the economy may face if the Bank of England uses conventional monetary policies to curb inflation? (100 words max)
- Suppose that the government believes the economy is not producing goods and services at its optimal level. In an attempt to stimulate the economy, the government increases the quantity of money in the economy by printing more money. This monetary policy the economy's demand for goods and services, leading to product prices. In the short run, the change in prices induces firms to produce goods and services. This, in turn, leads to a level of unemployment. In other words, the economy faces a trade-off between inflation and unemployment: Higher inflation leads to unemployment.The economies of many nations around the globe have been brought on their knees by COVID-19. Just when countries are on the path of recovery from the economic devastation caused by COVID-19, Russia invaded Ukraine which had worsened the economic outlook of the entire world. The nation Ghana as well as firms have not escaped the impact of the terrible events in Ukraine. Rising expenditure, dwindling revenue levels, increasing debt levels coupled with worsening macroeconomic indicators had led to the downgrading of the Ghanaian economy which has affected the ability of the country to go for external debt. In order, to deal with current challenges, the government in a process characterised by controversies passed the Electronic Transfer Levy Act 2022 popularly called E-levy. As the Finance Director of your company, you have been tasked to present a proposal to the Board of Directors on how your company will navigate the turbulent terrain of the Ghanaian economy. Your proposal must address…The economies of many nations around the globe have been brought on their knees by COVID-19. Just when countries are on the path of recovery from the economic devastation caused by COVID-19, Russia invaded Ukraine which had worsened the economic outlook of the entire world. The nation Ghana as well as firms have not escaped the impact of the terrible events in Ukraine. Rising expenditure, dwindling revenue levels, increasing debt levels coupled with worsening macroeconomic indicators had led to the downgrading of the Ghanaian economy which has affected the ability of the country to go for external debt. In order, to deal with current challenges, the government in a process characterised by controversies passed the Electronic Transfer Levy Act 2022 popularly called E-levy. As the Finance Director of your company, you have been tasked to present a proposal to the Board of Directors on how your company will navigate the turbulent terrain of the Ghanaian economy. Your proposal must address…
- According to the neoclassical growth model, the production function of an economy can be represented as Y=f(L,K, A). Which of the following is considered as a decline in technology under this framework? A fall in the capital to labour ratio Depreciation of capital stock A fall in labour to capital ratio. An increase in the number of steps a business must take to obtain government approval to sell a new product Reduction in immigrationIn a centrally planned economy, investment funds are allocated by the incentives to evaluate risks and act prudently. Under such an economic system, investors will haveRecent data from the Bureau of Labor Statistics show that the average price level for consumers rose 5.4% over the past year. While some are expressing concern over rising inflation leading the economy to “overheat,” there is some evidence indicating that this is due to the reopening of the economy as producers adjust to rising demand for goods and services. Many of the goods with the largest price increases, like bacon or cars and trucks, cannot have their production ramped up as quickly as demand is increasing. Other industries are facing supply chain challenges, like shortages of truck drivers. These problems are most likely to be short term, so, as supply catches up with demand, we can expect to see prices return to normal. As evidence, after spiking to record highs in early summer, lumber prices have now fallen below their price at the start of the year. The reason for the dramatic price increase earlier in the year was a combination of reduced supply in 2019 and a surge in demand…