Question

1. John Keynes formulated his ideas on the causes of economic downturns during the Great Depression. In his book, The General Theory of Employment, Interest and Money, one of the ideas he pioneered and which permeates economics today is the role of ___________ in making downturns persistent.

   		sticky wages and prices
   		monopolies
   		advertising
   		the world bank

2. The shaded ares on the graphs presented in the digging deeper power points slides represent

   		periods of economic boom as dated by the NBER
   		periods of recession as dated by the NBER
   		periods of recession as determined by Congress
   		periods of recession as determined by the Federal Reserve

3. When a recession is caused by a negative AD shock, we would expect inflation to _______________ and unemployment to _______________.

   		fall, rise
   		rise, fall
   		rise, rise
   		fall, fall

4. Which of the following recessionary periods was characterized by BOTH high unemployment and high inflation

   		Great Depression
   		1973-75 recession
   		1981-82 recession
   		Great Recession

Answer 1

Due to presence of HOMEWORKLIB POLICY, I am answering first question.

1.

Ans: Sticky wages and prices.

Explanation:

Keynes found that in real world wages and prices are sticky and not flexible due to which full employment equilibrium is hard to achieve. Since prices, wages are not flexible or adjust with lag, markets do not clear easily or take time to clear due to which cyclical downturns come into picture.

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