Eluminate 1 - Macroeconomic Models 1 What are the major points of the Keynesian Economic Model Keynes economic theory was based on an circular flow

Info iconThis preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
Macroeconomic Models 1. What are the major points of the Keynesian Economic Model? Keynes' economic theory was based on an circular flow of money. In Keynes' theory, one person's spendings goes towards anothers earnings, and when that person spends her earnings she is, in effect, supporting anothers earnings. This circle continues on and helps support a normal functioning economy. When the Great Depression hit, people's natural reaction was to hoard their money. Under Keynes' theory this stopped the circular flow of money, keeping the economy at a standstill. 2. What are the major points of the Classical Economic model? Classical economics is based on the idea that the operation of unrestricted markets generates aggregate or national production that fully utilizes the economy's resources and maintains full employment. The three primary assumptions of classical economics are flexible prices, Say's law, and the saving-investment equality. 3. What is a multiplier and how is it manifested in both models? Keynesian economists often calculate multipliers that measure the effect on aggregate demand only. the equilibrium level of real GDP, Y , is equal to the level of autonomous expenditure, A , multiplied by m , the Keynesian multiplier. Because the mpc
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 10/01/2011 for the course BIOLOGY 1510 taught by Professor --- during the Spring '11 term at Georgia State University, Atlanta.

Page1 / 2

Eluminate 1 - Macroeconomic Models 1 What are the major points of the Keynesian Economic Model Keynes economic theory was based on an circular flow

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online