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4.         Savings is $80 billion and intended investment is $70 billion.                       &nbs

4.         Savings is $80 billion and intended investment is $70 billion.                                  20 pts

What is the current total investment?

What is the current unintended investment?

Is this an equilibrium outcome?

What do the Keynesians say will happen to real GDP?

5.         Answer True or False for each of the following.                                            5 pts each

The Keynesians claim interest rates have a powerful effect on savings since people mainly save to earn interest.

The Keynesians claim that wages and prices are “downward sticky”.

In the Keynesian model the velocity of money moves against GDP.

Government spending can raise Aggregate Demand and real GDP in the Keynesian model.

Keynesians believe that monetary policy is very powerful at moving real GDP.

The Keynesians felt that the Great Depression was caused by inadequate demand partly coming from the stock market crash and partly from a lack of income growth for most people.

Contractionary gaps are more common than expansionary ones in the Keynesian model.

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