Macroeconomics - CH21 Macroeconomics: The Big Picture
Chapter 21 - Macroeconomics: The Big Picture
Chapter 21 - Macroeconomics: The Big Picture
Kartei Details
| Karten | 48 |
|---|---|
| Sprache | English |
| Kategorie | VWL |
| Stufe | Universität |
| Erstellt / Aktualisiert | 03.10.2020 / 23.06.2025 |
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when one person savs more, that person's wealth is increased, meaning that he or she can consume more in the future. But when everyone saves more, everyone's income falls, meaning that everyone must consume less today. Explain this seeming contradiction.
This question concerns the paradox of thrift; what is true for an individual - that saving makes you better off - is not always true for the economy as a whole. When an individual saves, that person adds to his or her wealth, providing for higher consumption in the future. However, if everyone saves, firms will not sell as much and will lay off workers. As unemployment rises, people will have less to spend in the economy and consumption will decline.
Before the Great Depression, the conventional wisdom among economists and policy makers was that the economy is largely self-regulating.
Is this view consistent or inconsistent with Keynesian economics? Explain.
The view that the economy is largely self-regulating is not consistent with Keynesian economics, which claims that managing the economy, via the tools of fiscal and monetary poilcy, is the government's responsibility.
Before the Great Depression, the conventional wisdom among economists and policy makers was that the economy is largely self-regulating.
What effect did the Great Depression have on conventional widsom?
The Great Depression was such a catastrophic occurence that it shifted the conventional widsom away from the view that the economy is largely self-regulating to the Keynesian view that the government should intervene to manage the economy.
Before the Great Depression, the conventional wisdom among economists and policy makers was that the economy is largely self-regulating.
Contrast the response of policy makers during the 2007-2009 recession to the actinos of policy makers during the Great Depressino. What would have been the likely outcome of the 2007-2009 recession if policy makers had responded in the same fashion as policy makers during the Great Depression?
During the recession of 2007-2009, policy makers actively used monetary and fiscal policy to boost the economy. If they had done nothing, as policy makers did during the Great Depressino, it is very likely that the recessino of 2007-2009 owuld have been even longer and deeper.
Why do we consider a business-cycle expansion different from long-run economic growth? Why do we care about the size of the long-run growth rate of real GDP relative to the size of the growth rate of the population?
The accompanying figure illustrates the increasing trade deficit of the United States since 1987. The United States has been consistently and, on the whole, increasingly importing more goods thatn it has been exporting. One of the countries it runs a trade deficit is China. Which of the following statements are valid possible explanations of this fact? Explain.
