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WOAH WOAH INSTABILITY!
How's the view?
Is the Economy self-correcting?
Follow the rules
Do you know your macro?
100
Mainstream economists believe instability in the economy arises from these two sources
What is Price Stickiness and Unexpected shocks to either aggregate demand or aggregate supply
100
This view states that macro instability is caused by price stickiness and unexpected changes in aggregate demand or supply
What is the main stream view
100
Monetarists usually hold that shifts in the short-run aggregate supply curves may not occur for this time period.
What is two to three years or even longer?
100
This rule states that money supply should be expanded each year at the same annual rate as the potential rate of growth of the real gross domestic product
What is monetary rule
100
The US Gross Domestic Product as of 2013
What is $16.8 trillion
200
stickiness in either input or output prices will mean that any shock to either aggregate demand or aggregate supply will result in changes in these two aspects of an economy
What is output and employment
200
Focuses on money supply, holds that markets are highly competitive, and says that a competitive market system gives the economy a high degree of macroeconomic stability
What is the monetarist view
200
This theory states that (1) people behave rationally, (2) all production and resource markets are highly competitive and that prices and wages are flexible both upward and downward
What is the rational expectations theory
200
According to monetary rule, the supply of money should be increased steadily between these two percentages
What is 3 and 5 percent
200
The current chairman (or should I say chairwoman) of the federal reserve
Who is Janet Yellen
300
This type of spending in particular is subject to wide “booms” and “busts”
What is investment spending
300
This view states the business cycles result from changes in technology and resource availability, which affect productivity and thus increase or decrease long-run aggregate supply
What is the real-business-cycle view
300
This type of economist assumes that workers anticipate some future outcomes before they occur and when price level changes are fully anticipated, adjustments of nominal wages are very quick
What is the New Classical economist
300
This rule is another modern monetary rule that specifies how the Fed should alter the Federal funds rate under differing economic circumstances
What is the Taylor rule
300
The father of modern economics
Who is Adam Smith
400
external events (i.e. wars) can boost resource prices and significantly raise per unit production costs, resulting in this major economic problem
What is cost-push inflation (and then recession)
400
businesses, consumers, and workers expect changes in policies or circumstances to have certain effects on the economy and in pursuing their own self-interest, take actions to make sure those changes affect them as little as possible
What is the rational expectations view
400
The insider-outsider theory states that nominal wages are described as this
What is inflexible downwards
400
Mainstream economists believe this rule is flawed because while there is indeed a close relationship between monetary supply and nominal GDP over long periods, in shorter periods, this relationship breaks down because the velocity of money has proved to be more variable and unpredictable than monetarists contend
What is the Friedman Monetary Rule
400
The branch of economics dealing with the performance, structure, behavior, and decision-making of an economy as a whole, rather than individual markets.
What is Macroeconomics
500
velocity has generally trended upward over the last several decades but this is how it would be described today
What is relatively stable
500
The view that the economy is stable at the full-employment level of domestic output in the long run because prices and wages adjust automatically to correct movements away from the full employment, noninflationary output
What is the new classical economic view
500
Businesses immediately recognize that the higher prices being paid for their products are part of what economic concept
What is inflation
500
This monetary policy dropped inflation from 13.5% in 1980 to 3.2% in 1983
What is a tight money policy
500
This man served two terms as chairman of the Federal Reserve, the central bank of the United States from 2006 to 2014
Who is Ben Bernanke