91影视

Explain the difference between 鈥渁ctive鈥� discretionary fiscal policy advocated by mainstream economists and 鈥減assive鈥� fiscal policy advocated by new classical economists. Explain: 鈥淭he problem with a balanced-budget amendment is that it would, in a sense, require active fiscal policy鈥攂ut in the wrong direction鈥攁s the economy slides into recession.鈥�

State and explain the basic equation of monetarism. What is the major cause of macroeconomic instability, as viewed by monetarists?

An economy is producing at full employment when AD unexpectedly shifts to the left. A new classical economist would assume that as the economy adjusts back to producing at full employment, the price level will ________.

a. increase

b. decrease

c. stay the same

Use an AD-AS graph to demonstrate and explain the price-level and real-output outcome of an anticipated decline in aggregate demand, as viewed by RET economists. (Assume that the economy initially is operating at its full-employment level of output.) Then demonstrate and explain on the same graph the outcome as viewed by mainstream economists.

Use the equation of exchange to explain the rationale for a monetary rule. Why will such a rule run into trouble if V unexpectedly falls because of, say, a drop in investment spending by businesses?

Place 鈥淢ON,鈥� 鈥淩ET,鈥� or 鈥淢AIN鈥� beside the statements that most closely reflect monetarist, rational expectations, or mainstream views, respectively:

a. Anticipated changes in aggregate demand affect only the price level; they have no effect on real output.

b. Downward wage inflexibility means that declines in aggregate demand can cause a long-lasting recession.

c. Changes in the money supply M increase PQ; at first only Q rises, because nominal wages are fixed, but once workers adapt their expectations to new realities, P rises and Q returns to its former level.

d. Fiscal and monetary policies smooth out the business cycle.

e. The Fed should increase the money supply at a fixed annual rate.

You have just been elected president of the United States, and the present chair of the Federal Reserve Board has resigned. You need to appoint a new person to this position, as well as a person to chair your Council of Economic Advisers. Using Table 19.1 and your knowledge of macroeconomics, identify the views on macro theory and policy you would want your appointees to hold. Remember, the economic health of the entire nation鈥攁nd your chances for reelection鈥攎ay depend on your selection.

Compare and contrast the market monetarist 5-percent target for nominal GDP growth with the older, simpler monetary rule advocated by Milton Friedman.