1.2. During the Depression, unemployment rose to 25 percent. The AS/AD model presented in the book suggests...

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1.2. During the Depression, unemployment rose to 25 percent.

The AS/AD model presented in the book suggests that a fall in the price level would have solved the problem.

Keynesians are not so convinced and believe that a fall in the price level would have lowered income, which would have shifted aggregate demand back further.

a. Demonstrate the standard argument graphically.

b. How does it deal (or not deal) with that interconnection between a fall in the price level and aggregate demand?

(Post-Keynesian)

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Economics

ISBN: 9781259193156

10th Edition

Authors: David Colander

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Question Posted: Oct 17, 2024 06:00 AM

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1.2. During the Depression, unemployment rose to 25 percent. The AS/AD model presented in the book suggests...

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