question

Did Keynesian or Classical economics support laissez-faire policy?

answer

Classical economics supported laissez-faire policies because they believed business cycles were temporary glitches, which the market would correct.

question

Would Keynesian or Classical economists be more likely to emphasize the fallacy of composition?

answer

Keynesians are more likely to emphasize the fallacy of composition. The fallacy of composition is the false assumption that what is true for a part will also be true for the whole. Keynes carefully distinguished the adjustment process for a single market from the adjustment process for the aggregate economy, arguing that the effects differ significantly between the two.

question

Is structural stagnation a Keynesian or a Classical theory?

answer

Structural stagnation is neither a Keynesian or Classical theory. It includes elements of both.

question

If output rises by 4 percent and population rises by 3 percent, how much does per capita output increase?

answer

1%

question

What are two ways in which long-term economic growth is measured?

answer

Increases in total output and per capita total output.

question

What has happened to growth rates in Western Europe and the United States in recent years?

answer

In recent years, Western Europe and the United States have exhibited very slow growth rates.

question

How does the U.S. per capita growth rate since 1940 compare to growth rates in other areas around the world?

answer

From 1940 to 1970, the U.S. growth rate was, on average, higher than the average world growth rate. Since 2000, the U.S. growth rate has been lower than the average world growth rate. Explanation: From 1940 to 1970 the U.S. economy grew at a rate of about 2.5 percent per year, which was lower than Western Europe and Japan but higher than many other countries. In the following decades until 2000, U.S. growth was higher than most except for India and China, which have experienced considerable growth. Since 2000 the U.S. economy has been slower than many countries, averaging about 1 percent per year in the first decade of the 2000s.

question

label each of the four phases of a representative business cycle.

answer

Each of the four phases—peak, downturn, trough, and upturn

question

How does a structural stagnation differ from a recession?

answer

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.Unemployment is due to temporary layoffs in a recession but longer-term changes in a structural stagnation.

question

Which has the more pessimistic view of the problems facing the United States economy: structural stagnation theory or conventional business cycle theory?

answer

Structural stagnation theory is more pessimistic because the economy remains stuck in a period of growth that is lower than the economy's normal growth rate, whereas in a business cycle the economic downturn is followed by an upturn that returns the economy to its long-term growth rate.

question

Distinguish between structural unemployment and cyclical unemployment.

answer

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.

question

Which one of the following is short-run involuntary unemployment?

answer

Cyclical unemployment, which results from fluctuations in economic activity, is best studied in the short-run framework.

question

The business cycle is:

answer

the term used to describe fluctuations in output around its long-term trend.

question

Nominal output is best defined as a measure of the:

answer

value of output at prices in the current year.

question

Between 2007 and 2009, the U.S. unemployment rate rose from under 5 percent to over 8 percent. A Keynesian economist would most likely blame this increase in unemployment on:

answer

a decline in the level of aggregate demand.

question

The Classical economists argued that:

answer

if unemployment occurs, it will cure itself because wages and prices will fall.

question

The highest amount of output an economy can sustainably produce and sell using existing production processes and resources is called:

answer

potential output.

question

If a country of 300 million people has a total income of $12 trillion, its per capita income is:

answer

$40,000.

question

From 2001 to 2010, which geographic area or country had the highest per capita growth rate?

answer

china

question

Per capita output would be certain to increase if:

answer

real output increases and population decreases.

question

Which of the following statements best characterizes the Keynesian view of business cycles?

answer

Expansions and contractions of the business cycle are symptoms of underlying problems and should be dealt with through activist government policies.

question

Unemployment caused by recession is called:

answer

cyclical unemployment.

question

News Story: Workers at a car-manufacturing plant in Flint, Michigan are laid off because the economy is weak and GM cars aren't selling well. GM isn't sure when the plant will reopen. What type of unemployment describes the workers' situation?

answer

Cyclical unemployment

question

The target rate of unemployment is defined as the:

answer

lowest sustainable rate of unemployment achievable under existing conditions.

question

The U.S. economy did not recover as expected after which economic downturn?

answer

The U.S. economy did not recover as expected after which economic downturn?

Macro Econ ch.6 – Flashcards

Unlock all answers in this set

Haven't found what you were looking for?

Search for samples, answers to your questions and flashcards