Tax cuts are more effective in generating the economy when the economy is in recession compared to at full employment." True or False? Show and explain your answer based on the AD-AS model

Q: List pros and cons of government spending. Can government spending be shown on the IS model or the…

A: AD(aggregate demand) has the following components: AD=C+I+G+(X-M)C is consumption expenditureI is…

Q: John Maynard Keynes created the aggregate expenditures model based primarily on what historical…

A: Keynesian economics is a demand side theory which considers the changes in the economy over short…

Q: Japan has had been in recession for decades despite having zero interest rates. Using the…

A: Recession refers to the economic situation in which the GDP per capita decreases and the…

Q: Why might it be important for policy makers to know which in zone of the SRAS curve the economy is?

A: SRAS (Short run aggregate supply): It refers which shows the positive relationship between the…

Q: Explain why is it possible that the economy will not self-correct out of a recessionary gap?

A: Self correction is viewed as movements of the short-run aggregate supply curve brought about by…

Q: Use the following graph, which shows an aggregate demand, to answer the next question.   If the…

A: Aggregate demand curve shows different combinations of price and real output demanded in the…

Q: The aggregate demand curve slopes downward because when the price level is lower, people can afford…

A: The aggregate demand curve slope downwards as the price level and the aggregate demand has a…

Q: Question 5 A decrease in one of the components of real GDP, such as Exports will cause the AD curve…

A: In macroeconomics, economic fluctuations are generally studied using the concepts of aggregate…

Q: Assume that the AD curve intersects the AS curve in the Neoclassical Region and that the government…

A: Answer: (C) It goes up.

Q: Stagflation is a macroeconomic situation where   Question 43 options:   GDP falls and unemployment…

A: Macroeconomics is the branch of economics that deals with concerning the economy as a whole.

Q: Westeros has recently discovered a new technology that would potentially increase profit for most…

A: (Since you have a posted a question with multiple sub-parts, we will solve the first three sub-part…

Q: If the economy is experiencing unemployment, the most appropriate government action to shift the…

A: Unemployment refers to a situation where the workers are ready to offer their labor at the existing…

Q: Which of the following statements about Keynes' contribution to macroeconomics is correct? A Keynes…

A: Option B is the correct answer   Keynes argued that depressions and recessions were almost always…

Q: In the AD/AS model, what prevents the economy from achieving equilibrium at potential output?

A: Equilibrium will occur at the point where the aggregate demand (AD) & the aggregate supply (AS)…

Q: The price level rises, and this changes the real value of consumers’ wealth. Does this cause a…

A: The rise or fall in price level leads to movement along the demand curve other things being…

Q: Suppose MPC = 0.8 and government spending increases by 1 trillion dollars. In the AD-AS equilibrium,…

A: The macroeconomic equilbrium in an economy is determined by the aggregate demand and aggregate…

Q: With the aid of a diagram and using the Keynesian analysis , explain in detail how income and…

A: The macroeconomic economic theory of total expenditure in the economy and its consequences on…

Q: What is the effect of a decrease in government spending in the IS LM model?

A: IS curve: - IS curve shows different combinations of interest rate and the level of GDP where…

Q: The Aggregate Expenditure Model is traditionally called the” Keynesian Cross”. Use the Aggregate…

A: The economics as a study is based upon the basic idea of scarcity, where the resources with the…

Q: “Keynesian economists believe that the multiplier effect from a change in government expenditure on…

A: Keynes believed that the prices are sticky i.e they don't change that much and sellers like to keep…

Q: To combat a recession, the Keynesian fiscal policy recommends the Government: Select one: a.…

A: The Keynesian proposition would result in the aggregate demand theory which would lead to the…

Q: From a spending model perspective, explain the causes of a recession

A: Recession refers to the situation where the growth rate of GDP is become negative between the two…

Q: If markets do not self-adjust, how can a decline in spending lead to a negative process that ruins…

A: Demand refers the total amount of goods and services that are willing and able to buy at the…

Q: Using graphical illustration of AS-AD framework, show the effects of following events on real output…

A: 1) Government raises taxes by $100 billion. This would lead to a reduction in disposable income as…

Q: Which of the following might cause the AD curve to shift to the right?     an increase in…

A: The AD bend, like most typical demand bends, slopes downward from left to right. Demand rises or…

Q: How would a dramatic increase in the value of the stock market shift the AD curve? What effect would…

A: An expansion in the value of the stock market would cause people to feel richer and in this way,…

Q: Use the Keynesian cross to predict the impact on equilibrium GDP of equal-sized increases in both…

A: The gross domestic product refers to the total amount of all the goods and services produced in an…

Q: Suppose most business executives expect a slowdown in the economy.  How might this situation affect…

A: The loss of business and consumer confidence leads to an economic recession.

Q: John Maynard Keynes was the first to show that government policy could be used to change aggregate…

A: John Maynard Keynes is considered to be the most important and popular economist of the early…

Q: Suppose an economy is hit by a recession and people’s income fall. Show graphically using AD-AS…

A: A recession is said to occur when there is a decline in economic activity for more than six months…

Q: using the Keynesian AD-AS diagram how can the economy  be in a state of equilibrium at any level of…

A: The equilibrium is an economic state  where Aggregate Demand (AD) intersects Aggregate Supply (AS)…

Q: Insert the missing word or phrase: When planned aggregate spending does NOT equal current GDP,…

A: Aggregate Spending is the aggregate expenditure which is sum of consumption and investment.

Q: Which of the following statements about Fiscal Policy is INCORRECT? (a) In order to combat…

A: Fiscal policy refers to the changes in federal government purchases and taxes. Expansionary fiscal…

Q: How do Classical and Keynesian economists differ in their view of the aggregate supply curve?

A: Classical school of economics is based on free market. They believes that market forces works…

Q: What two solutions did Keynes suggest as appropriate government policies in order to close a…

A: A recessionary gap occurs when the potential output exceeds the actual output that is, the economy…

Q: In macroeconomic theory, total or aggregate spending is denoted by A and total or aggregate…

A: The macroeconomic theory includes the macro-level components and deals with the national income,…

Q: Which of the following statements is TRUE regarding the Aggregate Expenditure model?

A: Answer 33.  Aggregate Expenditure Model is referred to as a model which relates to the components of…

Q: Suppose that an economy is currently in its long run equilibrium. Suppose that the government…

A: Aggregate demand (AD) refers to the total planned expenditure which all the sectors of the economy…

Q: Three ways to increase Consumption which would cause a shift right in the AD curve would be or or

A: At different price levels, the aggregate demand curve depicts the total quantity of all commodities…

Q: Using the AD/AS model construct two graphs that show how a recession can occur? Explain how…

A: A recession is a time of declining economic execution across a whole economy that goes on for a long…

Q: In the hypothetical economy, the AD curve and SAS curve are given by the following equations: AD:…

A: Given Functions Aggregate demand function Y=560-20P+3G Aggregate supply function Y=8+5P-3P(oil)