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Keynesian Perspective on Market Forces

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...

Recessionary and Inflationary Gap

by TheBusinessProfessor | Feb 23, 2025 | Economic Analysis & Monetary Policy

What is the Recessionary and Inflationary Gap? Keynes argued that, for reasons we explain shortly, aggregate demand is not stable—that it can change unexpectedly. Suppose the economy starts where AD intersects SRAS at P0 and Yp. Because Yp is potential output, the...

Keynesian, Intermediate, and Neoclassical Zones

by TheBusinessProfessor | Feb 23, 2025 | Economic Analysis & Monetary Policy

What are the Keynesian, Intermediate, and Neoclassical Zones in the Aggregate Supply Aggregate Demand Model? We can use the AD/AS model to illustrate both Say’s law that supply creates its own demand and Keynes’ law that...

Growth and Recessions – Aggregate Supply and Demand Model

by TheBusinessProfessor | Feb 23, 2025 | Economic Analysis & Monetary Policy

What causes Growth and Recessions in the Aggregate Demand – Aggregate Supply Model? In the AD/AS diagram, long-run economic growth due to productivity increases over time will be represented by a gradual shift to the right of aggregate supply. The vertical line...

Keynesian Perspective – Aggregate Demand

by TheBusinessProfessor | Feb 23, 2025 | Economic Analysis & Monetary Policy

What is the Keynesian Perspective of Aggregate Demand?  The Keynesian perspective focuses on aggregate demand. The idea is simple: firms produce output only if they expect it to sell. Thus, while the availability of the factors of production determines a nation’s...
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