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What is price stickiness Why do Keynesians believe that allowing for price stickiness

What is price stickiness? Why do Keynesians believe that allowing for price stickiness in macro analysis is important? 2. Describe four alternative responses available to policymakers when the economy is in recession. What are the advantages and disadvantages of each strategy? Please discuss the effects on employment, the price level, and the composition of output. What are some of the practical difficulties in using these stabilization policies to fight recessions? 3. Use the Keynesian model to explain the procyclical behavior of employment, money, inflation and investment. 4. According to Keynesian analysis, in what two ways does an adverse supply shock reduce output? What problems do supply shocks create for Keynesian stabilization policies? 5. According the Keynesian IS-LM model, what is the effect of each of the following on output, the real interest rate, employment and the price level? Distinguish between the short- run and long-run. a) Deregulation that allows banks to pay a higher interest rates on checking accounts b) A severe water shortages that causes sharp drops in agricultural output and increases in food prices

Feb 01 2020 View more View Less

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