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What is the underlying assumption for the Keynesian economic framework?

Which of the following assumptions is based on a Keynesian economic framework?

a. The aggregate demand curve can be shifted to the left through an increase in government spending.

b. Changes in aggregate demand prices do not cause wages and prices to quickly adjust because they are both sticky.

c. A large increase in government services is affordable to the tax base.

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Richa Arora
Richa AroraLv10
13 Sep 2020
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Related questions

1.  For a fiscal policy to be most effective, we must have

a. perfectly flexible wages and prices.

b. a vertical AS curve.

c. accurate information about the state of the economy.

d. a balanced government budget in each year.

e. a high marginal propensity to save.

2. Which of the following will make crowding out caused by government borrowing more severe?

a. A steep (inelastic) investment demand curve

b. A global credit market

c. Tax increases

d. A steep (inelastic) supply curve in the loanable funds market

e. None of the above

3. Government spending policies can be developed to work against the problems of unemployment and inflation because government spending can

a. decrease aggregate demand to combat unemployment and increase aggregate demand to combat inflation.

b. increase aggregate supply to combat unemployment and decrease aggregate demand to combat inflation.

c. increase aggregate supply to combat unemployment and decrease aggregate supply to combat inflation.

d. increase aggregate demand to combat unemployment and increase aggregate demand to combat inflation.

e. increase aggregate demand to combat unemployment and decrease aggregate demand to combat inflation.

 

1. If the price level doubles and the real output doesn't change, then nominal output also doubles.
2. Inflation makes it less difficult to interpret the information conveyed by prices.

3. Laissez-faire economists oppose government intervention in the market process.

4. Active demand management policies are based on the work of JohnMaynard Keynes.

5. In the AS/AD model, as the price level rises, the real value of assets increases, causing consumption to increase. This is one reason why the aggregate demand curve slopes down.

6. The short-run aggregate supply curve is upward sloping in part because increases in aggregate demand cause some firms to increase their price markups.

7. If productivity and wages both raises by 3 percent, then the short-run aggregate supply curve does not shift.

8. The long-run aggregate supply curve is vertical because all prices adjust in the long run.

9. If the economy is not in long-run equilibrium and other things are equal, then prices will eventually adjust to bring the economy to long-run equilibrium.

10. Most economists agree that it is possible for fiscal policy to fine-tune the economy.

A. A decrease in aggregate supply can result in:

  1. a recession
  2. cost-push inflation
  3. demand-pull inflation
  4. unemployment 

B. In the short run (intermediate-range) of the aggregate supply curve, higher aggregate demand will increase

  1. the price level but reduce real GDP.
  2. real GDP without raising the price level
  3. the price level without affecting real GDP
  4. both the price level and real GDP

C. Which of the following helps explain why real GDP is inversely related to the price level within the framework of the AD-AS model?

  1. As prices fall, domestic consumers have an incentive to buy more of the cheaper goods and services
  2. As prices fall, the wealth of people holding the fixed quantity of money increases, causing them to expand their purchases of goods and services
  3. As prices fall, the government will have to reduce taxes, which will lead to an increase in the number of goods and services purchased
  4. As prices fall, the monetary authorities will have to increase the money supply, which will lead to an increase in the number of goods and services purchased

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