Macronotes2 - 2/20/08 Went over Test class canceled...

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2/20/08 Macronotes Cont. Went over Test class canceled 2/27/08 Chapter 8: Keynesian Economics I. Great Depression a. Unemployment was 25% b. Why is the economy not fixing itself II. Economist John Maynard Keynes challenges the classical theory. According to him: a. Economy is not self-correcting b. Says law is not correct – instead demand creates supply c. Prices, wages, & interest rates are not flexible in the short run, only in the long run III.Keynesian theory a. Inadequate demand causes recessions i. “weak demand” – firms reduce output & lay-off workers – high unemployment ii. Need to increase demand/spending b. Economy may become “stuck” in a recessionary or inflationary gap i. Equilibrium may reach the natural level until the very long run c. Active role of government
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i. Increase demand by: 1. Decrease taxes 2. Increase government spending ii. Economy may experience fluctuations without government intervention d. Short run view of the economy i. More concerned with immediate effects of policies IV. Aggregate spending (= c+i+g + net exports) a. Consumption i. Disposable income
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This note was uploaded on 04/14/2008 for the course ECON 1110 taught by Professor Heatherklinger during the Spring '08 term at North Texas.

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Macronotes2 - 2/20/08 Went over Test class canceled...

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