Review Questions

8. Name some economic events not related to government policy that could cause aggregate demand to shift.

9. Name some government policies that could cause aggregate demand to shift.

10. From a Keynesian point of view, which is more likely to cause a recession: aggregate demand or aggregate supply, and why?

11. Why do sticky wages and prices increase the impact of an economic downturn on unemployment and recession?

12. Explain what economists mean by “menu costs.”

13. What tradeoff does a Phillips curve show?

14. Would you expect to see long-run data trace out a stable downward-sloping Phillips curve?

15. What is the Keynesian prescription for recession? For inflation?

16. How did the Keynesian perspective address the economic market failure of the Great Depression?

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