1. Explain why, according to Keynes, the money wage would not adjust sufficiently to keep the economy at full employment. 2. Derive the Keynesian aggregate demand schedule for the case in which investment is completely interest inelastic. Explain the resulting slone of the aggregate demand-

1. Explain why, according to Keynes, the money wage would not adjust sufficiently to keep the economy at full employment. 2. Derive the Keynesian aggregate demand schedule for the case in which investment is completely interest inelastic. Explain the resulting slone of the aggregate demand-

Brief Principles of Macroeconomics (MindTap Course List)

8th Edition

ISBN:9781337091985

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter18: Six Debates Over Macroeconomic Policy

Section: Chapter Questions

Problem 2CQQ

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Question

1. Explain why, according to Keynes, the money wage would
not adjust sufficiently to keep the economy at full
employment.
2. Derive the Keynesian aggregate demand schedule for the
case in which investment is completely interest inelastic.
Explain the resulting slope of the aggregate demand-
schedule for this case.
3. Explain the consequence of combining the Classical theory
of aggregate supply with the Keynesian system of demand
schedule.

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