What is the Lucas critique, and why was it so important to macroeconomists in the 1970s?
What will be an ideal response?
The Lucas critique suggests that historical relationships between economic variables will be changed significantly when there are significant changes in the economy such as new policies. In the 1970s this was important as it explained the movement of the Phillips curve.
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If you save less because the government is going to tax you and later provide you with a benefit, then this reduction in savings is referred to by economists as the
A. asset substitution effect. B. induced retirement effect. C. slovenly effect. D. bequest effect.
If the quantity of real GDP demanded is greater than the quantity of real GDP supplied, then
A) the economy must be producing at potential GDP. B) aggregate demand changes to restore equilibrium. C) the price level falls to restore the macroeconomic equilibrium. D) the price level rises and firms increase production. E) the price level falls and firms decrease production.
As an absolute amount (billions of dollars), which of the following countries provides the greatest amount of foreign aid?
(a) United Kingdom. (b) United States. (c) Italy. (d) Sweden.
What is the "doom loop" responsible for the rapid development and severity of the 2009 euro crisis?
What will be an ideal response?