Name some economic events not related to government policy that could cause aggregate demand to shift.
Name some government policies that could cause aggregate demand to shift.
From a Keynesian point of view, which is more likely to cause a recession: aggregate demand or aggregate supply, and why?
Why do sticky wages and prices increase the impact of an economic downturn on unemployment and recession?
Explain what economists mean by “menu costs.”
What is on the axes of an expenditure-output diagram?
What does the 45-degree line show?
What determines the slope of a consumption function?
What is the marginal propensity to consume, and how is it related to the marginal propensity to import?
Why are the investment function, the government spending function, and the export function all drawn as flat lines?
Why does the import function slope down? What is the marginal propensity to import?
What are the components on which the aggregate expenditure function is based?
Is the equilibrium in a Keynesian cross diagram usually expected to be at or near potential GDP?
What is an inflationary gap? A recessionary gap?
What is the multiplier effect?
Why are savings, taxes, and imports referred to as “leakages” in calculating the multiplier effect?
Will an economy with a high multiplier be more stable or less stable than an economy with a low multiplier in response to changes in the economy or in government policy?
How do economists use the multiplier?
What tradeoff does a Phillips curve show?
Would you expect to see long-run data trace out a stable downward-sloping Phillips curve?
What is the Keynesian prescription for recession? For inflation?
How did the Keynesian perspective address the economic market failure of the Great Depression?