by TheBusinessProfessor | Feb 23, 2025 | Economic Analysis & Monetary Policy
Why are Prices are Flexible in the Long Run? How does the macroeconomy adjust back to its level of potential GDP in the long run? What if aggregate demand increases or decreases? Economists base the neoclassical view of how the macroeconomy adjusts on the insight that...
by TheBusinessProfessor | Feb 23, 2025 | Economic Analysis & Monetary Policy
How does Potential GDP affect the Aggregate Demand Aggregate Supply Model? In the aggregate demand/aggregate supply model, we show potential GDP as a vertical line. Neoclassical economists who focus on potential GDP as the primary determinant of real GDP argue that...
by TheBusinessProfessor | Feb 23, 2025 | Economic Analysis & Monetary Policy
How does Physical Capital Affect Productivity? Physical capital per person refers to the amount and kind of machinery and equipment available to help people get work done. Compare, for example, your productivity in typing a term paper on a typewriter to working on...
by TheBusinessProfessor | Feb 23, 2025 | Economic Analysis & Monetary Policy
What is the Keynesian Perspective on Market Forces? Ever since the birth of Keynesian economics in the 1930s, controversy has simmered over the extent to which government should play an active role in managing the economy. In the aftermath of the human devastation and...
by TheBusinessProfessor | Feb 23, 2025 | Economic Analysis & Monetary Policy
What is the Keynesian Approach to Unemployment and Inflation? Keynesian macroeconomics argues that the solution to a recession is expansionary fiscal policy, such as tax cuts to stimulate consumption and investment, or direct increases in government spending that...
