104 – Macroeconomics – Flashcards

Unlock all answers in this set

Unlock answers
question
The equation underlying the mainstream view of macroeconomics is
answer
Ca + Ig + Xn + G = GDP
question
According to mainstream macroeconomists, U.S. macro instability has resulted from
answer
investment "booms" and "busts" and, occasionally, adverse aggregate supply shocks
question
The mainstream view of macro instability is that
answer
changes in investment shift the aggregate demand curve and thus cause changes in real GDP
question
Economist Milton Friedman is most closely associated with
answer
monetarism
question
Monetarists believe that
answer
the economy is more stable when active fiscal and monetary policy are used
question
According to monetarists
answer
changes in the money supply are the primary cause of changes in the price level
question
The basic equation of monetarism is
answer
MV = PQ
question
According to the equation of exchange, changes in the money supply can affect
answer
both the price level and real output.
question
The velocity of money is the
answer
number of times per year the average dollar is spent on final goods and services.
question
Monetarists say that the relationship between the amount of money which households and businesses want to hold and the level of national output and income
answer
is relatively stable.
question
Monetarist say
answer
a change in the money supply will change aggregate demand and therefore the nominal GDP
question
As monetarists view the equation of exchange
answer
V is quite stable
question
Monetarists believe the private economy is inherently
answer
stable and that the government sector should be small
question
In the equation of exchange the nominal GDP is designated by
answer
PQ
question
According to monetarists, a change in the money supply changes
answer
aggregate demand which in turn changes the nominal GDP
question
According to monetarists, the Great Depression in the United States largely resulted from
answer
inappropriate monetary policy.
question
According to real business cycle theory
answer
recessions result from declines in long-run aggregate supply, rather than decreases in aggregate demand
question
Assume that many households and businesses reduce their spending only because they expect other households and consumers to reduce their spending. Also suppose that all households and consumers would be better off if they did not reduce their spending. This situation best describes the
answer
idea of coordination failures.
question
New classical economists
answer
hold that, left alone, the economy gravitates to its full employment level of output
question
Rational expectations theory implies that the
answer
long-run aggregate supply curve is vertical
Get an explanation on any task
Get unstuck with the help of our AI assistant in seconds
New