Study Questions for Lecture 7

Study Questions for Lecture 7 - would respond to this...

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Questions for Lecture 7 Questions from Lecture 7. 1. What three conditions must be met in order for the economy to be in macroeconomic equilibrium? Briefly discuss each. 2. Upon what assumptions is the Keynesian cross model based? What, if any, equilibrium condition does each assumption eliminate? 3. Suppose total expenditure is greater than total output (or E > Y). Explain how producers would respond to this situation. 4. Suppose total expenditure is less than total output (or E < Y). Explain how producers
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Unformatted text preview: would respond to this situation. 5. Draw a graph and use it to explain why the reactions of producers to the conditions E &lt; Y and E &gt; Y will cause output to adjust until E = Y. 6. Use a graph to show that if economic actors decide to increase spending the equilibrium level of output increases. Repeat for a decrease in spending. 7. Why does this model imply that measures of future spending (such as new orders for durable goods and building permits) will be leading economic indicators?...
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This note was uploaded on 09/14/2009 for the course EC 400 taught by Professor Cover during the Spring '09 term at Alabama.

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