Opportunities for Discussion

1. In what important respects does the Keynesian approach to modeling the macroeconomy differ from the aggregate supply and demand approach?

2. Why do you think the early Keynesians chose to ignore the supply side of the economy? What were the consequences of this choice?

3. How is the aggregate demand curve related to the aggregate expenditures function?

4. How do consumption and investment spending affect aggregate expenditures and output over the business cycle? Which is more responsible for volatility?

5. How does international trade affect aggregate demand, output, and employment?