What did Keynes mean when he said that prices are sticky?OA. Prices are sticky because of cost-push inflation.OB. Prices, especially the price of labor, are inflexible downward.OC. Prices are inflexible upward due to the aversion people have to higher prices.OD. Prices need to be sticky or we would have cost-push inflation.If the prices were sticky, according to Keynes, this would then imply that theOA. long-run aggregate supply is vertical.OB. short-run aggregate demand horizontal.OC. long-run aggregate demand vertical.OD. short-run aggregate supply is horizontal.

Regarding the first question, Keynes referred to prices as "sticky" to describe their resistance to…

Answered: What did Keynes mean when he said that…

Economics:

10th Edition

ISBN:9781285859460

Author:BOYES, William

Publisher:BOYES, William

Chapter8: Macroeconomic Equilibrium: Aggregate Demand And Supply

Section: Chapter Questions

Problem 20E

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Suppose Chino is a closed economy. A large portion of the work force has joint astrong labor union. As such, the nominal wages of most workers are downwardrigid.Suppose most households lose their wealth in a recent clash of the stock market.How would the price and output level of Chino be affected in the short run?Explain by using the AD-AS model. Particularly, use the sticky-wage model ofaggregate supply to explain the magnitude of the effects on price and output.
Which of the following could potentially cause a recession? O AD increases, and wages are sticky. O AD increases, and wages are flexible. O AD falls, and wages are flexible. AD decreases, and wages are sticky.
Which of the following is incorrect about the Keynesian model shown below? Price Level P₁ AD₁ E₁ Y₁ Real GDP SRAS AD E₁ Yp
Owing to the global rise of fertilizer prices in 2022 (in turn caused by the Russian invasion of Ukraine), the country experienced a shortage in some agricultural commodities. Using the AS-AD model, which of the following is an anticipated effect of this phenomenon? O a. Aggregate demand will rise in the short run. b. Aggregate demand will be higher than initial level in the long run. O C. Prices will quickly rise in the short run. O d. Prices will fall even below the pre-supply shock level in the long run.
How can they say that "Rising prices are symptom of an expanding current supply"?
Suppose that inflation increases from Year #1 to Year#2 without growth. Which of the following graphs correctly shows this situation? (Note: Year #2 positions are shown with dark blue lines.) Price Level Price Level a Ps 0 1 LRAS QN Q₁ LRAS ON 0₁ A) Graph A B) Graph B C) Graph C D) Graph D SRAS SRAS UI SRAS, AD, (M-$800 billion; V - 3) MTD AD₂ (M-$820 billion; V = 3) SRAS, (c) MVT Real GDP AD₂ (M-$800 billion; V - 4) AD, (M-$800 billion; V - 3) Real GDP Price Level Price Level Qa 0 ON P₁ O -- 1 1 0₁ ON 2 -=-= LRAS 1 T LRAS 6 ở SRAS, SRAS₂ AD, (M-$800 billion; V-3) (b) AD₂ (M-$780 billion; V- 3) SRAS1 MIV SRAS2 (d) MV↓ Real GDP AD, (M-$800 billion; V-3) AD₂ (M-$900 billion; V=2) Real GDP
Name some factors that could cause AD to shift, and say whether they would shift AD to the tight or to the left.
Does Says law apply more accurately in the long run or the short run? What about Keynes law?
In a recent press conference of the Federal Reserve of the United States2, Chairman Powellincluded the following as part of the description of the economic situation in the US: “Bottlenecks and supply chain disruptions are limiting how quickly production can respond to the rebound in demand in the near term. As a result, overall inflation is running well above our 2 percent longer-run goal.” How can this situation be represented by the AD-AS framework (i.e. how have AD and AS curves shifted?) If the bottlenecks and supply chain disruptions are just temporary, what are expected to happen?
1. Imagine an economy, where the SRAS in terms of inflation is given by II=5+Y, where Y is output. Imagine that the long run AS curve is given by Y=2. (25 marks) a) Give the equation of the AD curve (you can take liberties), if we assume that initially, the economy is at its long-run equilibrium. Justify. b) Imagine that your chosen AD curve's intercept goes up by one unit due to an expansionary monetary policy. What will be the new final equilibrium after this change? Justify. c) What will be the equilibrium after two periods of adjustment? Justify. d) Assume that before all the changes in the economy, in the initial, long-run equilibrium, the interest rate was 4 percent. Give an IS and an LM curve that are compatible with this initial equilibrium. Justify. e) What are the IS and LM curves going to be at the very end of the adjustment process, i.e., in the new long run equilibrium? Justify.
According to Keynes, the government may fight unemployment by O raising its budget deficit O increasing the supply of money O through a rise in its spending and a cut in tax rates O all of the above
Price Level 0 AS₁ a ASO b c Real GDP Refer to the figure above. If aggregate supply is AS, and aggregate demand is ADo, then: a surplus of real output of gh yould f represents a price level that would result in a surplus of real output of ac f represents a price level that would result in a shortage of real output of ac f represents a price level that would result in a surplus of real output of a at any price level above g. a shortage of real output would occur occur

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