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CHAPTER 9
Economic Instability
ECONOMICS, 5eRoger Arnold
ECONOMICS, 5eRoger Arnold
Arnold Economics, 5e / Ch. 9 Economic Instability©2001 South-Western College Publishing 2
http://cnnfn.cnn.com/2001/02/16/europe/g7/
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Arnold Economics, 5e / Ch. 9 Economic Instability©2001 South-Western College Publishing 3
Exhibit 1 Keynes’s View of Say’s Law in a Money Economy
Arnold Economics, 5e / Ch. 9 Economic Instability©2001 South-Western College Publishing 4
Exhibit 2 The Economy Gets “Stuck” in a Recessionary Gap
Arnold Economics, 5e / Ch. 9 Economic Instability©2001 South-Western College Publishing 5
Exhibit 3 A Question of How Long It Takes for Wage Rates and Prices to Fall
Arnold Economics, 5e / Ch. 9 Economic Instability©2001 South-Western College Publishing 6
Exhibit 4 Consumption and Saving at Different Levels of Disposable Income (in billions)
Arnold Economics, 5e / Ch. 9 Economic Instability©2001 South-Western College Publishing 7
Exhibit 5The Derivation of the Total Expenditures (TE) Curve
Arnold Economics, 5e / Ch. 9 Economic Instability©2001 South-Western College Publishing 8
Exhibit 6 The Three States of the Economy
Arnold Economics, 5e / Ch. 9 Economic Instability©2001 South-Western College Publishing 9
Exhibit 7 The Economy: In Equilibrium, and in a Recessionary Gap, Too
Arnold Economics, 5e / Ch. 9 Economic Instability©2001 South-Western College Publishing 10
Exhibit 8 A Change in Autonomous Investment Spending Relative to a Change in Real GDP
Arnold Economics, 5e / Ch. 9 Economic Instability©2001 South-Western College Publishing 11
Exhibit 9 Unemployment Rates in Industry, 1925–1928, and 1929–1933; Percentage Decrease in Prices, 1929–1932
SOURCE: Interwar Unemployment in International Perspective, Barry Eichengreen and T.J. Hatton (Dordrecht/Boston/London: Kluwer Academics Publishers).
Arnold Economics, 5e / Ch. 9 Economic Instability©2001 South-Western College Publishing 12
Exhibit 10 Autonomous Investment Spending and the Multiplier
Arnold Economics, 5e / Ch. 9 Economic Instability©2001 South-Western College Publishing 13
Exhibit 11 The Keynesian AS Curve
Arnold Economics, 5e / Ch. 9 Economic Instability©2001 South-Western College Publishing 14
Exhibit 12 Can the Private Sector Remove the Economy from a Recessionary Gap?