Macroeconomics

1. In the Keynesian framework, which of the following events might cause a recession? Which might cause inflation? Explain.

A. A large increase in the price of the homes people own (3 points)

B. Rapid growth in the economy of a major trading partner (3 points)

C. The development of a major new technology offers profitable opportunities for business (3 points)

D. The interest rate rises (3 points)

E. The goods imported from a major trading partner become much less expensive (3 points)

2. From a Keynesian point of view, which is more likely to cause a recession: aggregate demand or aggregate supply? Why? (12 points)

3. Name a factor that determines net exports. Provide an example of how that factor can contribute to increasing net exports. (12 points)

4. What is the expenditures multiplier and why is it important? (12 points)

5. From observation, is it true that generally, wages are sticky downwards (once they reach a certain level, they usually do not decrease) but not upwards (even if they reach a certain level, they can still increase)? Explain. (12 points)

6. A neoclassical economist and a Keynesian economist are studying the economy of Vineland. It appears that Vineland is beginning to experience a mild recession with a decrease in aggregate demand. Which of these two economists would likely advocate that the government of Vineland take active measures to reverse this decline in aggregate demand? Why? (7 points)

7. During the Great Recession of 2008-2009, some economists criticized the American Recovery and Reinvestment Act. Name and explain at least two arguments used against the “stimulus package.” (15 points)

8. What is the shape of the neoclassical long-run Phillips curve? What assumptions do economists make that lead to this shape? (15 points)

This work, “Written Assignment 3 Questions,” is a derivative of Principles of Macroeconomics 2e by Steven A. Greenlaw and David Shapiro, OpenStax, used under CC BY 4.0. “Written Assignment 3 Questions” is licensed under CC BY 4.0 by Thomas Edison State University.