{[ promptMessage ]}

Bookmark it

{[ promptMessage ]}

MAC_1E_Study_Guide_Chap_9

MAC_1E_Study_Guide_Chap_9 - Chapter9 (Goodwin,etal Chapter...

Info icon This preview shows pages 1–3. Sign up to view the full content.

View Full Document Right Arrow Icon
9-1 Chapter 9 Aggregate Demand and Economic Fluctuations Macroeconomics In Context (Goodwin, et al.) Chapter Overview This chapter first introduces the analysis of business cycles, and introduces you to the two stylized facts of the business cycle. The chapter then presents the Classical theory of savings-investment balance through the market for loanable funds. Next, the Keynesian aggregate demand analysis in the form of the traditional "Keynesian Cross" diagram is developed. You will learn what happens when there’s an unexpected fall in spending, and the role of the multiplier in moving to a new equilibrium. Chapter Objectives After reading and reviewing this chapter, you should be able to: 1. Describe how unemployment and inflation are thought to normally behave over the business cycle. 2. Model consumption and investment, the components of aggregate demand in the simple model. 3. Describe the problem that “leakages” present for maintaining aggregate demand, and the classical and Keynesian approaches to leakages. 4. Understand how the equilibrium levels of income, consumption, investment, and savings are determined in the Keynesian model, as presented in equations and graphs. 5. Explain how, in the Keynesian model, the macroeconomy can equilibrate at a less-than-full-employment output level. 6. Describe the workings of “the multiplier,” in words and equations. Key Terms Okun’s “law” “full-employment output” ( Y* ) aggregate demand ( AD ) behavioral equation Active Review Fill in the Blank 1. The macroeconomic goal that involves keeping the rate of unemployment and inflation at acceptable levels over the business cycle is the goal of _________________.
Image of page 1

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

View Full Document Right Arrow Icon
9-2 2. The _________________ economists believe that aggregate demand needs active guidance, whereas the _____________ economists believe that aggregate demand can take care of itself. 3. The recurrent fluctuations in the level of national production is called the __________________. 4. When economic activity declines, usually measured by a fall of real GDP for two consecutive quarters, the economy is said to be in a _____________. 5. The equation that expresses the inverse relationship between the unemployment rate and the rapid growth of real GDP is known as _______________. 6. The level of output that occurs when the economy is not suffering from an unemployment problem (that is, when any unemployment that exists is just transitory), is called ______________output. 7. In the traditional macro model (with no government or foreign sector), what households and firms intend to spend on consumption and investment is called _________________. 8. The equation AD = C + II is a(n) _______________, because it reflects a theory about the behavior of one or more economic agents or sectors. The equation Y = C + I is a(n) _______________, because it represents the actual level of aggregate spending that in fact occurs. 9. In the Keynesian consumption function, C = C + mpc Y , C represents ___________, the mpc is the _____________, and Y represents ____________.
Image of page 2
Image of page 3
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern