PRINCIPLES OF MACROECONOMICS
Study Guide Eleven for Chapter 16
April 16, 2013
1.
How does the business cycle before World War II compare to what we have seen since 1946?
2.
What event caused many economists to start thinking about the short-run macro-economy?
3.
a.
b.
What happened to both per-capita income and unemployment during the Great
Depression? Contrast these numbers with the most recent recession.
According to lecture, what was the nature of monetary and fiscal policy in
the Great Depression? Contrast these policies with the most recent recession.
Be sure to note differences in how banks were treated in each event.
4.
What happened to nations that departed the gold standard during the Great Depression? Why
would we see this outcome?
5.
According to Mark Zandi – the economic advisor to the John McCain Presidential campaign—
what was the impact of the stimulus package passed by the federal government in 2009?
6.
Define the following
a.
Sound Finance
b.
Ricardian Equivalence Theorem
c.
Functional Finance
7.
If the Ricardian Equivalence Theorem holds, what is the impact of a federal tax cut on national output?
8.
List and explain the five problems identified in lecture with fiscal policy.
9.
What is crowding out? Why does this tell us that fiscal policy expand an economy if it is already at
full employment?
10.
Define – and provide examples – of Automatic Stabilizers.
11.
Explain the pro-cyclical policies of state governments. How does this undermine the policies of the
federal government?
12.
According to lecture, what approach to macroeconomics do economists generally favor
- in a depression?
- in response to hyperinflation?
- in normal economic times.
13.
Which should be tried first in a recession (monetary or fiscal policy)?
14.
According to lecture, which U.S. presidents favored Keynesian policies (since World War II)?
15.
According to lecture, what did Milton Friedman mean when he said: “In one sense, we are all
Keynesians now; in another, nobody is any longer a Keynesian.”