Identify how ideas from monetarism and rational expectations have been incorporated into mainstream thinking about macroeconomics.
What will be an ideal response?
First, monetarists have gotten mainstream economists to recognize that changes in the money supply are an important element in explaining long-lasting and rapid inflation. Second, mainstream economists now recognize that expectations matter because of rational expectation theory and because of theories coordination failures in the economy.
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Keynes was especially concerned with explaining the ________ level of output and employment during the ________
A) low; 1920s B) low; 1930s C) high; 1920s D) high; 1930s
In evaluating policy effectiveness, economists rely on:
A. positive analysis. B. normative analysis. C. both normative and positive analysis. D. Economists can never fully analyze any real-world policy effectiveness.
An increase in supply is graphically represented by a leftward shift of the supply curve
Indicate whether the statement is true or false
Which of the following is the most frequently used tool the Fed uses to control the supply of money?
A. the discount rate B. the reserve requirements C. open market operations D. the 30-year home-mortgage interest rate