Question
An economist makes the following argument - The economy basically self-corrects out of recessions. When the economy is in recession, unemployment creates an excess supply
An economist makes the following argument - "The economy basically self-corrects out of recessions. When the economy is in recession, unemployment creates an excess supply of labor, which causes wages to fall. As a result, employers increase their hiring and the economy recovers automatically." How would a Keynesian respond to this claim?
b. Consider an economy where the reserve ratio is = 0.2 and the currency ratio is = 0.2. What Fed bond purchase is required in order to raise the money supply by $600 billion?
c. In 2019, government purchases of goods and services at all levels of government were $3.75 trillion (about 17% of GDP). Yet, the federal government alone had expenditures of $4.8 trillion. How can you explain this apparent inconsistency?
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