1. CHAPTER 9 Economic Instability ECONOMICS, 5e Roger Arnold ECONOMICS, 5e Roger Arnold

2. Arnold Economics, 5e / Ch. 9 Economic Instability ©2001 South-Western College Publishing 107 http://cnnfn.cnn.com/2001/02/16/ europe/g7/ Business news

3. Arnold Economics, 5e / Ch. 9 Economic Instability ©2001 South-Western College Publishing 108 Exhibit 1Keynes’s View of Say’s Law in a Money Economy

4. Arnold Economics, 5e / Ch. 9 Economic Instability ©2001 South-Western College Publishing 109 Exhibit 2The Economy Gets “Stuck” in a Recessionary Gap

5. Arnold Economics, 5e / Ch. 9 Economic Instability ©2001 South-Western College Publishing 110 Exhibit 3A Question of How Long It Takes for Wage Rates and Prices to Fall

6. Arnold Economics, 5e / Ch. 9 Economic Instability ©2001 South-Western College Publishing 111 Exhibit 4Consumption and Saving at Different Levels of Disposable Income (in billions)

7. Arnold Economics, 5e / Ch. 9 Economic Instability ©2001 South-Western College Publishing 112 Exhibit 5 The Derivation of the Total Expenditures (TE) Curve

8. Arnold Economics, 5e / Ch. 9 Economic Instability ©2001 South-Western College Publishing 113 Exhibit 6The Three States of the Economy

9. Arnold Economics, 5e / Ch. 9 Economic Instability ©2001 South-Western College Publishing 114 Exhibit 7The Economy: In Equilibrium, and in a Recessionary Gap, Too

10. Arnold Economics, 5e / Ch. 9 Economic Instability ©2001 South-Western College Publishing 115 Exhibit 8A Change in Autonomous Investment Spending Relative to a Change in Real GDP

11. Arnold Economics, 5e / Ch. 9 Economic Instability ©2001 South-Western College Publishing 116 Exhibit 9Unemployment 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).

12. Arnold Economics, 5e / Ch. 9 Economic Instability ©2001 South-Western College Publishing 117 Exhibit 10Autonomous Investment Spending and the Multiplier

13. Arnold Economics, 5e / Ch. 9 Economic Instability ©2001 South-Western College Publishing 118 Exhibit 11The Keynesian AS Curve

14. Arnold Economics, 5e / Ch. 9 Economic Instability ©2001 South-Western College Publishing 119 Exhibit 12Can the Private Sector Remove the Economy from a Recessionary Gap?