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Paul [167]
2 years ago
7

For each macroeconomic viewpoint, identify whether it is a position held by classical economists, Keynesian economists, or monet

arists. If the viewpoint is shared by more than one group, check all that apply.
a. A decrease in aggregate demand will only lead to a temporary departure from full employment output. Since prices and wages are flexible, the economy will automatically adjust to full employment in the long run.
b. The velocity of money, while not constant, is predictable.
Business
1 answer:
labwork [276]2 years ago
8 0

Answer:

a. Classical theory

b. Monetarist school.

Explanation:

Classical theory assumes that the fall in aggregate demand will create temporary affect on employment and ;later in the long run economy will adjust itself and will be at full employment automatically. Keynesian theory believes that demand is the factor which drives the economy. If the economy is at recession then efforts should be made to increase demand which will turn the economy growth upright.

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What will happen if government spending increases by $100 billion is:

Real output will increase by a maximum of $400 billion.

<h3>Government spending</h3>

Using this formula

Multiplier=1/(1-MPC)

Where:

MPC=Marginal propensity to consume =0.75

Let plug in the formula

Multiplier=1/(1-0.75)

Multiplier=1/0.25

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Increase in GDP= Government spending ×4

Increase in GDP=$400

Inconclusion what will happen if government spending increases by $100 billion is: Real output will increase by a maximum of $400 billion.

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Other things the same, when the government spends more, the initial effect is that a. aggregate demand shifts right. b. aggregat
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Answer: Option (a) is correct.

Explanation:

Correct option: Aggregate demand shifts right.

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