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In the Keynesian model in the short run (IS-LM Framework), what is likely to happen to employment after each of the following shocks, based on the effective labor
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- In the Keynesian model in the short run (IS-LM Framework), what is likely to happen to employment after each of the following shocks, based on the effective labor demand curve? How about an increase in taxes?In the Keynesian model in the short run (IS-LM Framework), what is likely to happen to employment after each of the following shocks, based on the effective labor demand curve? An increase in consumer spending generated by a reduced desire for saving.Consider the Keynesian IS-LM model. How would each of the following scenarios affect output, employment, the real interest rate and the price level in the short run? In the long run? Wealth decreases .An increase in immigration causes an increase in labor supply. The capital stock increases.
- Empirical studies that have examined the longer-term effects of increasing the minimum wage Find more significant long-term effects because new firms are in a better position to choose labor-saving technology than existing firms Have been criticized for failing to control for dynamic shocks to the economy over the long run Conclude that the short-term effect is no different from the long-term effect Find more negative employment effects in the short-term than in the long-termThe theory of macroeconomic fluctuations is also the short run model of the macroeconomy and assumes that business firms will supply any amount of output demanded by the economy TRUE OR FALSE?What would a Keynesian likely recommend in response to a recession? What would a neoclassical likely recommend? Why would a Keynesian policy response not make much sense in response to a minor recession like the one that occurred in 1990? What would be the cost of letting the economy adjust by itself to a new long run equilibrium?
- In the Keynesian model, if there is a sudden rise in the aggregate demand curve, in the short run, it will cause a inflation b deflation c increase in output d a and cThe figure below is a part of the AD-AS model as a description of the current situation of an economy. PA=$10 P YA=4000 Y a) Find the short-run equilibrium (i.e. the real output and the price level thereof) of this economy. b) If the natural level of output is 3500, which one will be higher, the unemployment rate at point A, or the natural unemployment rate? Explain. c) Give two reasons as to why the short-run aggregate supply is upward sloping. d) Suppose the government takes no action about the situation indicated above. Explain, with the help of a figure properly labeled, what will happen in this economy in the long run. e) Describe the two kinds of macroeconomic policies that can be used in the situation described before part c). Indicate clearly in your description whether each policy is to the aggregate demand or aggregate supply or Further, give reason(s) as to why the government may want to use these policies rather than doing nothing.Explain why in our New-Keynesian model, equilibrium out- put (Y) and employment (N) are demand-determined. What is the key parameter driving this result? Explain.
- Describe the full employment macroeconomic equilibrium in the ASAD models?In the basic New Keynesian model, suppose that there is an increase in the future marginal product of capital. Explain your results with the aid of diagrams. Suppose that the central bank keeps the nominal interest rate at its initial value. What will be the effect on current inflation and on output? Suppose that the economy initially faces an increase in anticipated future inflation and a zero output gap. When the shock occurs, what should the central bank do?How would the level of aggregate demand be affected by a rise in the interest rate in the Keynesian theory? Which components would be affected most strongly?