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Homework answers / question archive / 1)What is price stickiness? Why do Keynesians believe that allowing for price stickiness in macroeconomic analysis is important?          What does the Keynesian model predict about monetary neutrality (both in the short run and in the long run)? Compare the Keynesian predictions about neutrality with those of the basic classical model

1)What is price stickiness? Why do Keynesians believe that allowing for price stickiness in macroeconomic analysis is important?          What does the Keynesian model predict about monetary neutrality (both in the short run and in the long run)? Compare the Keynesian predictions about neutrality with those of the basic classical model

Economics

1)What is price stickiness? Why do Keynesians believe that allowing for price stickiness in macroeconomic analysis is important? 

 

 

 

 

  1. What does the Keynesian model predict about monetary neutrality (both in the short run and in the long run)? Compare the Keynesian predictions about neutrality with those of the basic classical model.
  2. In the Keynesian model, how do increased government purchases affect output and the real interest rate in the short run? In the long run? How do increased government purchases affect the composition of output in the long run? 

 

  1. Describe three alternative responses available to policymakers when the economy is in recession. What are the advantages and disadvantages of each strategy? Be sure to discuss the effects on employment, the price level, and the composition of output. What are some of the practical difficulties in using macroeconomic stabilization policies to fight recessions? 

 

 

 

 

  1. What does the Keynesian model predict about the cyclical behavior of average labor productivity? How does the idea of labor hoarding help bring the prediction of the model into conformity with the business cycle facts? 

 

 

  1. According to the Keynesian analysis, in what two ways does an adverse supply shock reduce output? What problems do supply shocks create for Keynesian stabilization policies?

 

 

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