A Comparison of Macroeconomic Views
Classical: Free markets maintain full employment without government intervention
Keynesian: The government needs to increase or decrease aggregate demand as needed, focus is on fiscal policy
Monetarist: Fiscal policy is ineffectual, and while the quantity of money is the only thing that is important to the economy, the Fed should not use discretionary monetary policy to change the money supply
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The interpretation of the slope coefficient in the model ln(Yi) = ?0 + ?1Xi + ui is as follows:
A) a 1% change in X is associated with a ?1 % change in Y. B) a change in X by one unit is associated with a ?1 change in Y. C) a change in X by one unit is associated with a 100 ?1 % change in Y. D) a 1% change in X is associated with a change in Y of 0.01 ?1.
An example of a "missing" market would be:
A. the market to buy and sell children for adoption. B. the market to buy and sell a kidney. C. the market to buy and sell dates for a Friday night. D. All of these markets are missing.
Creative destruction refers to the process where
a. new products and methods of production are continuously replacing old ones b. producing more of one good causes you to produce less of another c. everybody involved is made worse off d. new ways to destroy buildings are employed
The proponents of rational expectations believe that
a. there will be a substantial time lag before people anticipate the eventual effects of a shift to a more expansionary macro-policy. b. macro-policies that stimulate demand and place upward pressure on the general level of prices will temporarily increase output and employment. c. the inflationary side effects of expansionary policies will be anticipated quickly, and therefore, even their short-run effects on real output and employment will be minimal. d. discretionary changes in macro-policy can be made in a manner that will reduce the economic ups and downs of a market economy.