Introduction to macroeconomics Essay Example | Topics and Well Written Essays - 1750 words

Introduction to macroeconomics - Essay ExampleHowever, during recessions, when unemployment vagabond rises, the call for will still be met by the sum up, although the train level will be lower. This is why in the goods market prices and quantity will settle at the equilibrium but high unemployment drive out still be present in the economy. This has been termed as the Keynesian unemployment.As what has been described earlier, in ascertain output to meet the demands, there atomic number 18 two viewsthe Keynesian and the classical view. The classical view argues that prices and hire be flexible, in such a way that excesses in either demand or supply will quickly be absorbed by the economy and resume full employment of resources afterwards economic shocksor abrupt changes in the aggregate demand and supply curves. The Keynesian view on the other hand argues, as apparent in its sticky theory of prices and wages which says that these two factors are sticky in the short run becaus e of contractual rigidities such as agreements made with different bear on groups such as the labor unions. In the latter situation, the one proposed by Keynes, higher levels of aggregate demands are needed for output to respond positively because aggregate supply curve is relatively flat specially when output levels are low. In this situation, the economy can have long periods of unemployment because prices and wages are behind to adjust to shocks, and reaching full employment of resources is slow to reach.When classical economists argue that unemployment results from the interaction of the labor demand and supply curves, and lowering the wages will spread the labor supply which can curb unemployment in the process, Keynes argue that such is not applicable when unemployment is due to business cycle downturns, when because of lower demands of products in the economy, demand for labor is also low.The lower demand for goods results into lower demands for