Questions tagged [keynesian-economics]

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1answer
55 views

Why is Keynes attacking the (neo)classical theory of interest rates on the grounds that it is indeterminate?

I do understand that he argues that in order to draw the loanable funds supply curve, you have to already know the volume of income, i.e. production, and therefore the interest rate in advance. But ...
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1answer
29 views

loanable funds theory: why is the supply of loanable funds equal to saving (+ dishoarding + new money)?

It seems that the loanable funds theory suggests that all that is saved is supplied in the market for loanable funds. This makes sense when we are talking about 'household saving' (i.e. household ...
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1answer
44 views

Why Keynesians prefer short run measures despite straight long-run Phillips curve?

I was studying about the Monetarists' and Keynesians' view of the Phillips curve and natural rate theory of Friedman. It seems intuitive to me as to why Friedman argues that using an expansionary ...
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2answers
284 views

Keynes' conception of investment

Keynes defines saving as equal to investment, saying: "Having now defined both income and consumption, the definition of saving, which is the excess of income over consumption, naturally follows ....
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1answer
56 views

Would directing more money to science and research and development be an effective response to recessions?

Typical responses to recessions is to follow Keynesian economics and support demand. Would directing money towards science and research and development be a better long term solution to recessions ...
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1answer
65 views

Is Keynesian economic theory still considered capitalism?

When we compare neoclassical economic theory with Keynesian economic theory as they pertain to capitalism, do they both fall within the spectrum of capitalism? or is Keynes's idea of state ...
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0answers
22 views

Keynesian cross. Can there be a situation when the point of equilibirum “runs away”, shifts in response to attempts to reach it?

In Keynesian cross model, as far as I understand, income-expenditure equilibirum is reached this way: when unplanned inventory investment>0, then firms produce less, when unplanned inventory ...
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0answers
19 views

Does combination of the paradox of thrift and the acceleration principle reduce economy to c=a level of consumption during recession?

By "c=a level" I mean situation when all consumption by households equals to autonomous spending, more or less. I assume no counter-cyclical policies(including automatic stabilizers). I also assume ...
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1answer
21 views

Demand-side effects meaning

I found the term of demand-side effects in the abstract of the following paper: journals-sagepub-com/ DOI/abs/10.1177/0974930619872083 . What does that mean? Can you explain it to me please? I need ...
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1answer
33 views

Trying to understanding Mark Blyth’s statement about Keynes

I am reading a book called "Austerity, the history of a dangerous idea" written by Mark Blyth. While talking about Keynes, the author writes: "he [Keynes] showed that although any worker can ...
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2answers
30 views

Real wages fluctuation as per classical economics

I have just started studying Macroeconomics and have noticed that as per the Classical economics, the real wage level will always remain same because any change in price level in the market is ...
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1answer
26 views

How can autonomous private spending change budget surplus?

I was reading Keynesian economics in R.Dornbusch's book where he mentioned the defects of using budget surplus as a measure where he says it can be changed and effected by autonomous private spending ...
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0answers
14 views

Keynesia multiplier and government spendings

I am trying to solve a question for a test and I a stuck with this question: Consider the Keynesian demand-side model with fixed prices and wages. The (autonomous spending) multiplier is 3. What will ...
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3answers
106 views

Do Keyensians believe that it's wrong for households to aggresively save money?

Many Austrian/Neoclassical websites argue that Keynes and Keynesians demonise saving and encourage individual people to spend rather than save. Someone (not an economist) recently told me that I need ...
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33 views

Understanding a Keynesian point of view

The statement is - Inflation is caused by independant cost push factors and causes an increase in money supply .This is from the Keynesian school of thought.How would cost push factors ,say an ...
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1answer
52 views

Good source for marginal propensity to consume by country?

Is there a good data source that aggregates the MPCs of various countries? Thanks.
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1answer
56 views

What is “industrial capitalism”?

What's the difference between "industrial capitalism" and "agrarian capitalism" and "mercantilism" and the "industrial revolution" and the 20th century ideas of "Keynesianism"? Is agrarian capitalism-...
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1answer
102 views

Why incomes should decline in equilibrium state

According to Keynes, the prosperity of a population is measured by the aggregated income of each individual. Spending this income keeps the economy away from a depression. If there is too much ...
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0answers
19 views

Difference between IS curve viewed by Keynes and by Friedman

In my economics lectures, we are going through Keynes vs Friedman. As far as I got we have a downward sloping IS curve in the IS-LM model. We get this curve from the Keynesian cross when the rate of ...
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1answer
263 views

Keynesian-cross analysis [closed]

I have a question from my textbook which is: Using the Keynesian-cross analysis, assume that the consumption function is given by C = 100 + 0.6(Y – T). If planned investment is 100 and T is 100, then ...
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1answer
58 views

IS-LM - Effect of interest rate on price level

I'm starting to study the Keynesian theory, and I have just read that the increase of interest rate ($r$) will lower the price level ($P$). I tried to understand this using the IS-LM model (I mean, ...
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1answer
169 views

Keynesian Cross and Balanced Budget Multiplier

Hi! I am trying to understand the problem above, and was wondering if someone could help me with the last question. I think I am fine with all other questions. Here is my attempt: (i) The fiscal ...
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0answers
226 views

How is there full employment level at equilibrium level according to Keynesian theory(AD-AS approach)?

According to Keynesian theory :- Equilibrium level is the point at which Aggregate Demand curve intersects Aggregate Supply curve . And this point is termed as Full Employment Level How do we ...
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1answer
315 views

When can one read the general theory of employment,interest and money?

I am a first-year undergrad econ student and was interested in reading Keynes' book. in the preface, Keynes pointed out that the text deals in the abstract and is meant for his fellow economists. ...
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1answer
2k views

Short run Aggregate supply curve is horizontal or positively sloped?

I want to understand the adjustment process from Very short run production decision to Short run production decision to Long run production decision. As far as I've understood: consider an increase in ...
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0answers
104 views

Marginal propensity to consume and multiplier effect

Recently I had a conversation with a certain person (call her X) about the marginal propensity to consume (and about the multiplier effect). With marginal propensity to consume I mean $c_1$ as a part ...
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1answer
134 views

Equilibrium income in Simple Keynesian Model

I could not understand how to analyse the effect of the given situation in this question on government's expenditure and income. If the budget is balanced, the use of calculus technique also didn't ...
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2answers
500 views

What will be the effect on velocity of money when demand for real money increases?

Suppose that a change in government regulations allows banks to start paying interest on checking accounts. The money stock is the sum of currency and demand deposits, including checking accounts. (...
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1answer
34 views

Macroeconomics- money supply LM model [closed]

why does an increase in money supply , lower the interest rate and shift the LM curve down.?
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1answer
2k views

What are the assumptions of real business cycle theory and Keynesian theory?

What are the differences between the approaches of Keynes and Real Business Cycle theorists? What are the assumptions made by both the theories? How do they differ in their methodology? Do they ...
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2answers
200 views

Balanced budget and change in taxes

Consider a simple Keynesian economy in which the government expenditure ($G$) exactly equals its total tax revenue: $G = tY$ where $t$ is the tax rate and $Y$ is the national income. Suppose that the ...
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1answer
131 views

What are the differences on the impact of a universal basic income from a liberal and a keynesian point of view?

A classmate asked me this and I have no idea how to approach the question. How would I even describe the effects of the universal basic income on the labour market from a Keynesian point of view?
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2answers
189 views

Does Keynesianism increase the incentive to invest? [closed]

Lets say you invest $1billion in a city in recession. The investment will have a multiplier, boosting the value of your investment. Thus if keynesianism was correct there would be an increased ...
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1answer
111 views

How does the government launch of Tomahawk missiles against Syria affect the economy and governmental budget?

Last night an air strike was launched against Syria of about 60 Tomahawk missiles. At approximately $832,000 apiece, this airstrike cost the US gov't about 49 million dollars. Initially, this sounds ...
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5answers
975 views

Where does capital come from?

Sorry if this is a birds and the bees type question. Where does capital come from? And I am not talking human capital (which to my mind is skills basically). I suppose I'm taking about financial ...
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1answer
495 views

Simple Keynesian model

It is given that economy is at equilibrium at $ Y_0 $ = 1000. If Government undertakes a fiscal change so that tax rate $t$, increases by 0.05 and government spending increases by 50, will the budget ...
3
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1answer
199 views

Keynesian Ethics

Reading Hayek and von Mises I found a bunch of strong arguments against interventionism beyond economics (philosophical and ethical aspects). The technical difference between Classical and Keynesian ...
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1answer
739 views

Simple Keynesian model of income determination

When determining equilibrium, we take consumption equal to C= ¢ + c' y where ¢ is the autonomous consumption or minimum consumption that would take place even in absence of income. What could be the ...
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1answer
542 views

Why is the consumption line and 45degree line's intersection not the equilibrium income level?

The question is as below The answer is A. I understand why it is A, but do not understand why it isn't C. Doesn't the point where the consumption line and 45 degrees line intersect represents the ...
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2answers
2k views

What is the difference between aggregate supply and GDP?

Usually when I read online, I see the following repeated frequently: aggregate demand is equal to GDP. I understand that aggregate expenditures is the aggregate demand at a particular price level, and ...
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1answer
8k views

What is the difference between the Classical and Keynesian models?

I have read something about the short and long run aggregate supplies, but I don't know what the main difference is about these two models. Does someone know the difference(s) between these two models?...
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1answer
2k views

the slope of the LM curve [duplicate]

I'm confused because my textbook says the higher interest elasticity of money demand is , the flatter slope of the LM curve is. If the interest changes, then isn't it the movement along the curve in ...
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1answer
2k views

Real world application of IS-LM model

I learnt IS-LM model but I got curious whether it is applicable to the real world. I mean it's just an model, so I doubt that the realtionship between Y and r actually exists. Are there any real life ...
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3answers
410 views

Raising interest rates to prevent inflation

I am reading a book about the Mundell-Fleming Model and I have encountered a part which says: The Fed raised U.S. interest rates several times during 1994 to prevent U.S. inflation. Isn't it the ...
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0answers
466 views

AS-LM Model and derivation of the LM curve

When we derive the LM curve, we assume that supply of money is exogenous. However, let's say the central bank has some target interest,r1, and it adjust supply of money to keep interest rates equals ...
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2answers
176 views

What would be the defining characteristic of New-Keynsian thought?

If you had to summarize New-Keynsian thought into one paragraph, or a set of equations, what would it be?
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1answer
263 views

What impact did major fiscal policy actions taken during the Great Recession (2007-09) have on U.S. economic performance?

What impact did fiscal policy actions taken during the Great Recession (2007-09) have on U.S. economic performance? Bush passed the Economic Stimulus Act of 2008 and also the Emergency Economic ...
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0answers
261 views

What major fiscal policy actions were taken during the Great Recession (2007-09)?

What major fiscal policy actions were taken during the Great Recession (2007-2009)?
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0answers
1k views

Impact of Fiscal and Monetary Policy during Great Recession on U.S. Economic Performance

What major fiscal and monetary policy actions were taken during the Great Recession (2007-2009)? What impact did they have on U.S. economic performance? I understand how how the recession occurred in ...
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3answers
1k views

How Does Keynesian Theory Address Supply Shocks, Like the California Drought?

From what I understand about Keynesian theory, when we're facing deflation, lowering interest rates or increasing government spending/lending (when consumers are cutting back) helps stimulate economic ...