Economic Growth, Business cycle and structural stagnation – Flashcards
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Did Keynesian or Classical economics support laissez-faire policy?
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Classical economics supported laissez-faire policy.
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Would Keynesian or Classical economists be more likely to emphasize the fallacy of composition?
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Keynesian economists would be more likely to emphasize the fallacy of composition.
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Is structural stagnation a Keynesian or a Classical theory?
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Structural stagnation is neither a Keynesian or Classical theory. It includes elements of both.
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If output rises by 10 percent and population rises by 6 percent, how much does per capita output increase?
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4%
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What are two ways in which long-term economic growth is measured?
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Increases in total output and per capita total output.
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How does a structural stagnation differ from a recession?
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1. A recession is a short period of declining output whereas a structural stagnation is a period of protracted slow growth and high unemployment. 2. A structural stagnation is a short period of declining output whereas a recession is a period of protracted slow growth and high unemployment.
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Which has the more pessimistic view of the problems facing the United States economy: structural stagnation theory or conventional business cycle theory?
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The structural stagnation theory is more pessimistic because it argues that the economy must undergo structural changes before it will return to its long-term growth trend. An example is that with structural stagnation, workers will have to accept lower wages or learn new skills before the economy returns to potential. In the conventional business cycle view, the economic recession is short-lived. Continuing the example that is given for structural stagnation, those who become unemployed will be rehired without having to accept lower wages or learn new skills.
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Distinguish between structural unemployment and cyclical unemployment.
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Structural unemployment is unemployment caused by the institutional structure of an economy or by economic restructuring making some skills obsolete, whereas cyclical unemployment is unemployment resulting from fluctuations in economic activity.
