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 Macroeconomics: Events and Ideas

a) The economy is under inflationary pressure. The head of the President's Council of Economic Advisers is a staunch Keynesian. Will this Keynesian recommend or not recommend? Explain.

b) Prior to the 1930s, classical economics was the predominant theory about the behavior of the aggregate price level, aggregate output, and the appropriate role of monetary policy. Describe how classical economists believed the economy would be affected by an increase in the money supply.

c) Explain the rational expectations theory and how it predicts the usefulness of fiscal and monetary policy.

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Richa Arora
Richa AroraLv10
28 Sep 2019

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12.

1. Is opportunity cost always present?


2. What is the problem at the heart of economics?


3. What is included in GDP and what is excluded?


4. If the consumer price index increases, how does this impact the average citizen?


5. What is the business cycle?


6. What is the relationship among the potential output level of the economy, the natural rate of unemployment, cyclical unemployment, structural unemployment, and frictional unemployment?


7. What did Keynesians believe about investment and the adjustment of wage rates?


8. What did pre-Keynesian believe about the market and its ability to pull itself out of a recession?


9. What role do investments in human capital, physical capital, technology development, and improving institutional quality play in creating economic growth?


10. How does a fractional reserve banking system work and what is the relationship between the money multiplier and the reserve requirement?


Wh What is fiscal policy?

12. What are the relations between government spending, the marginal propensity to consume, the marginal propensity to save, and the multiplier effect?

13. What are some of the problems with using fiscal policy in an effective manner?

14. What role did the Great Depression play in changing the government%u2019s approach to the economy?

15. What is stagflation and how did it challenge Keynesian orthodoxy?

16. What is supply side economics and how does it function?

17. What is the crowding out effect?

18. What is the new classical approach to the stimulatory impact of fiscal policy implemented through deficit spending?

19. What role does the department of the Treasury play in the American economy?

20. What role does the Federal Reserve Banking system play in managing the American policy?

21. What are the tools that the Fed uses to influence the money supply?

22. What approach to the money supply do those embracing monetarism suggest?

23. What dangers does monetary policy pose for the economy?

24. How do shifting price levels impact debtors and savers?

25. Can you use aggregate demand/ aggregate supply analysis to understand and explain the impact of a tax cut?

26. Can you use aggregate demand/ aggregate supply analysis to understand and explain the impact of a tax increase?

27. Can you use aggregate demand/aggregate supply analysis to understand and explain the impact of an increase in government spending?

28. Can you use aggregate demand/aggregate supply analysis to understand and explain the impact of a cut in government spending?

29. Can you use aggregate demand/aggregate supply analysis to understand and explain the impact of an expansionary monetary policy?

30. Can you use aggregate demand/ aggregate supply analysis to understand and explain the impact of a restrictive monetary policy?

31. How do automatic stabilizers influence the economy?

32. How does a deficit and large debt influence the economy?

33. What is the relationship between the expansion of the money supply and inflation?

34. What is the relationship between interest rates and inflation rates?

35. How do expectations impact the effectiveness of monetary policy?

36. What restricts the ability of the Fed to purchase U.S. securities?

37. What is Money?

38. What is the primary motivation of bankers and banks?

39. What is the impact of higher interest rates on the value of a currency and a nation%u2019s net exports?

40. What is the Conference Board and what does it do?

41. Why do countries willing lend the U.S. government money despite the relatively large debt to GDP ratio of the United States?

42. How does trade contribute to growth?

43. How do institutions contribute to growth?

44. How does the relative size of government contribute to growth?

45. What is the Philips Curve?

46. How does the rule of 70 work?

47. Do High Income countries always grow at a faster pace than lesser developed countries?

48. How do high levels of inflation effect growth?

49. Can you identify the amount of growth in an economy by using the percentage change formula?

50. What countries are presently experiencing high rates of economic growth?



12.

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