Chapter 24: Q. 59 (page 604)
Suppose we extend the circular flow model to add imports and exports. Copy the circular flow diagram onto a
sheet of paper and then add a foreign country as a third agent. Draw a rough sketch of the flows of imports, exports,
and the payments for each on your diagram.
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Name some factors that could cause the SRAS curve to shift, and say whether they would shift SRAS to the right or to the left.
What is the Keynesian zone of the SRAS curve? How much is the price level likely to change in the Keynesian zone?
Does Say’s law apply more accurately in the long run or the short run? What about Keynes’ law?
If households decide to save a larger portion of their income, what effect would this have on the output, employment, and price level in the short run? What about the long run?
In your view, is the economy currently operating in the Keynesian, intermediate or neoclassical portion of the economy’s aggregate supply curve?
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