Question

Explain how it is possible for one economist to accept both the Keynesian and neoclassical perspectives.

Explain how we can model the collapse of the housing market in the AD/AS model. Hints: When the bubble burst and wealth fell so rapidly, what curve will shift? When that curve shifts, what does that predict will happen to unemployment, inflation, and GDP?

Answer 1

Answer 1;-

An economist would choose either neo classical or Keynesian viewpoint but not both because both the schools are conflicting and takes different assumptions and reaches different conclusions.

Then again Keynesian believes that economy isn't generally at full employment level.

Some economist accepts the both Keynesians and neo-classical perspectives.

Over the short run, the Keynesian explanation of monetary fluctuation is correct while over the long haul, the economy is at full employment level, in this way here the neoclassical perspectives hold valid about the economy.

Hence, economists accept the both theories depending on the time spans.

Answer 2;-

The most interesting thing I learned from the podcast was that 23 people dead Ohioans were approved for mortgages (Macroeconomics).

Though the most heart wrenching thing was "lying, greedy mortgage banker[s]" were giving out NINA loans, meaning they gave people a bunch of money without first checking to see if they had any way of paying it back (Macroeconomics).

A housing bubble is a run-up in housing prices fueled by demand, speculation, and exuberant spending to the point of collapse (Chappelow). This can be seen below:

At the point when the housing bubble bursts, there became an overabundance of houses that were up for sale because people didn't have money to buy houses nor keep the ones they had (Macroeconomics). This made the supply curve race towards the right as the demand curve did during the housing bubble. With the price (inflation) falling, unemployment would increase and the GPD would be below potential GDP (Greenlaw).