...Principles of Macroeconomics, 9e - TB1 (Case/Fair/Oster) Chapter 18 Debates in Macroeconomics: Monetarism, New Classical Theory, and Supply-Side Economics 18.1 Keynesian Economics 1 Multiple Choice 1) Who wrote the General Theory of Employment, Interest, and Money? A) Adam Smith B) David Ricardo C) Milton Friedman D) John Maynard Keynes Answer: D Diff: 1 Topic: Keynesian Economics Skill: Fact 2) Keynesian economics includes the idea that A) economic policies are ineffective. B) the economy is basically stable. C) prices adjust to clear the markets. D) labor markets don't always clear due to wage rigidities. Answer: D Diff: 1 Topic: Keynesian Economics Skill: Fact 3) Among the propositions of the Keynesian school of thought is A) economic policies are ineffective. B) aggregate supply management is the key to a stable economy. C) aggregate demand determines equilibrium output. D) rational expectations. Answer: C Diff: 1 Topic: Keynesian Economics Skill: Fact 4) Keynes believed which of the following? A) The government has a role to play in fighting inflation, but not in fighting unemployment. B) The government has a role to play in fighting unemployment, but not in fighting inflation. ...
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...RETURNS USING THE VARIABLE BETA MODEL AND LAGGED VARIABLE BETA MODEL Thomas M. Krueger* and Mohammad H. Rahbar* Abstract Beta is found to be a function of several leading economic indicators and government policy variables within the context of the Variable Beta Model which incorporates economic characteristics in the single index model in a multiplicative manner. When contemporaneous macroeconomic descriptors are replaced with reporting-period-lagged macroeconomic descriptors, in the Lagged Variable Beta Model, model explanatory power increases. Findings suggest that the lagged beta model is more likely to satisfy the ordinary least squares assumptions of serially independent error terms. INTRODUCTION Beta as a measure of priced risk is again under attack. Fama and French's [10,11] finding that the single index market model (SIMM) does not describe the last 50 years of average stock returns has been widely reported. Such a finding has widespread implications for corporate finance and investment management. Capital budgeting has frequently been based upon the belief that a higher return was required from projects with more volatile cash flows under the assumption that the volatile cash flows are at least partially dependent upon systematic factors. Firms which have based a portion of their appeal on the basis of their high beta and assumed higher rates of return may see an exodus of shareholders. Utility rate structures designed to give investors a return consistent with that...
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...the World A Tour of The World A Tour of The World Chapter 1: A Tour of the World CHAPTER 1 Prepared by: Fernando Quijano and Yvonn Quijano Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall • Macroeconomics, 5/e • Olivier Blanchard 1-1 The United States Table 1-1 1996–2006 (average) 2006 2007 2008 3.1% 3.4% 3.3% 2.1% 2.5% Output growth rate Unemployment rate 6.2 5.0 4.6 4.6 4.8 Inflation rate The unemployment rate 4.0 2.0 2.9 2.6 2.2 Output growth rate: annual rate of growth of output (GDP). Unemployment rate: average over the year. Inflation rate: annual rate of change of the price level (GDP deflator). 3 of 18 Chapter 1: A Tour of the World The inflation rate The period 1996-2006 was one of the best decades in recent memory: The average rate of growth was 3.4% per year. The average unemployment rate was 5.0%. The average inflation rate was 2.0%. Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall • Macroeconomics, 5/e • Olivier Blanchard 1-1 The United States 4 of 18 1-1 The United States Has the United States Entered a New Economy? Should We Worry About the U.S. Trade Deficit? Figure 1 - 2 Figure 1 - 3 Rate of Growth of Output per Hour in the United States Since 1960. The U.S.Trade Deficit Since 1990 The trade deficit increased from about 1% of output in 1990 to about 6% of output in 2006. The average...
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...Unit 1 - Individual Project - Introduction to Macroeconomic Theory Click Link Below To Buy: http://hwcampus.com/shop/unit-1-individual-project-introduction-macroeconomic-theory/ Assignment Details Assignment Description Weekly tasks or assignments (Individual or Group Projects) will be due by Monday and late submissions will be assigned a late penalty in accordance with the late penalty policy found in the syllabus. NOTE: All submission posting times are based on midnight Central Time. In economics, they say a picture is worth a thousand words. Below, you will find two scenarios. Your assignment is to discuss the situation by writing the solutions, and then show the solutions and how you got here in one or more graphs or flowcharts. Scenario One Supply and demand are foundational concepts in understanding economic theory. Whether you are a coffee drinker or not, you have been tasked to examine the impact of supply and demand when dealing with the coffee retail industry. A few companies probably come to mind. Pick a major coffee retailer, and then contemplate what has been happening to both the supply and demand for this product. Next, analyze the following scenario that deals with what happened in the coffee industry at the beginning of the last decade: In the early part of the last decade, there was an overproduction of coffee. The price dropped so low that producers' costs were higher than the market price. The reason this happened was that market prices...
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...Unit 1 - Individual Project - Introduction to Macroeconomic Theory Click Link Below To Buy: http://hwcampus.com/shop/unit-1-individual-project-introduction-macroeconomic-theory/ Assignment Details Assignment Description Weekly tasks or assignments (Individual or Group Projects) will be due by Monday and late submissions will be assigned a late penalty in accordance with the late penalty policy found in the syllabus. NOTE: All submission posting times are based on midnight Central Time. In economics, they say a picture is worth a thousand words. Below, you will find two scenarios. Your assignment is to discuss the situation by writing the solutions, and then show the solutions and how you got here in one or more graphs or flowcharts. Scenario One Supply and demand are foundational concepts in understanding economic theory. Whether you are a coffee drinker or not, you have been tasked to examine the impact of supply and demand when dealing with the coffee retail industry. A few companies probably come to mind. Pick a major coffee retailer, and then contemplate what has been happening to both the supply and demand for this product. Next, analyze the following scenario that deals with what happened in the coffee industry at the beginning of the last decade: In the early part of the last decade, there was an overproduction of coffee. The price dropped so low that producers' costs were higher than the market price. The reason this happened was that market prices...
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...INTRODUCTION Macroeconomic Variables Macroeconomics is a branch of economics dealing with the performance, structure, behaviour, and decision-making of an economy as a whole, rather than individual markets. This includes national, regional, and global economies. Macroeconomic is a factor that is pertinent to a broad economy at the regional or national level and affects a large population rather than a few select individuals. Macroeconomic factors are key indicators of economic performance and are closely monitored by governments, businesses and consumers. Macroeconomic factors are the factors which affect the wider economy. In other words these factors seem to summarize the picture of economy. Macroeconomic variables include economic output, unemployment, inflation, interest rates, money supply, exchange rate, foreign reserves, savings and investment. Variables used in study: • Consumer Price Index (CPI) Inflation is a rise in the general level of prices of goods and services in an economy over a period of time. When the general price level rises, each unit of currency buys fewer goods and services. Consequently, inflation also reflects erosion in the purchasing power of money – a loss of real value in the internal medium of exchange and unit of account within the economy. A chief measure of price inflation is the inflation rate, the annualized percentage change in a general price index (normally the CPI) over time. A consumer price index (CPI) measures changes in the...
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...David Lenz Macroeconomics: Science or Not? After reading both articles about macroeconomics and whether it is a science or not, I am intrigued by both writers’ ideas. In the article, “What is economics good for?” by Rosenberg and Curtain, they discuss that economics should not be considered a science but instead a craft, saying that “the Chairman of the Federal Reserve must, like a first violinist tuning the orchestra, have the rare ear to fine-tune complexity (Rosenberg and Curtain, 1).” By saying this they are implying that in order to have a strong grasp on economics and know what you are doing, you must step away from the hard math and instead use wisdom and a strong, “gut feeling.” In the second article titled, “The Real Trouble with Economics,” written by economist Paul Krugman, he argues against Rosenberg and Curtain stating that they have missed some important facts about how recent crisis were handled and that economics is in fact a science. In the article Krugman states, “T`hey apparently imagine that QE was an intuitive reaction by Bernanke, one that academic macroeconomics would never have suggested. Nothing could be further from the truth (Krugman, 1).” This meaning that instead of the two men’s belief of Bernanke having a “hunch” about how to fix the crisis, there were already methods and algorithms produced to lead him to solution. Krugman also dives into the fact that just because macroeconomics does not behave like normal sciences: physics, chemistry...
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...Chapter 1 What is Macroeconomics? ( Chapter Outline 1. How Macroeconomics Affects Our Everyday Lives (a) The “Big Three” Concepts of Macroeconomics 2. Defining Macroeconomics (a) How Macroeconomics Differs from Microeconomics (b) Economic Theory: A Process of Simplification 3. Actual and Natural Real GDP (a) Unemployment: Actual and Natural (b) Real GDP and the Three Macro Concepts 4. Macroeconomics in the Short Run and Long Run (a) The Short Run: Business Cycles (b) Business Cycle Concepts (c) The Long Run: Economic Growth 5. Case Study: A Century of Business Cycles (a) Real GDP (b) Unemployment 6. Macroeconomics at the Extremes (a) Unemployment in the Great Depression, 1929–40 (b) The German Hyperinflation of 1922–23 (c) Fast and Slow Growth in Asia 7. Taming Business Cycles: Stabilization Policy (a) The Role of Stabilization Policy 8. The “Internationalization” of Macroeconomics IP* Box: How Does U.S. Economic Performance Rank? ( Chapter Overview Chapter 1 begins by introducing a set of three central macroeconomic concepts, called the “Big Three Concepts of Macroeconomics. They are the unemployment rate, the inflation rate, and productivity growth. Introducing the field of macroeconomics to students in this way has an important advantage. It facilitates the early introduction and definition of basic macroeconomic terminology, which gives students a chance to get used to thinking of macroeconomic issues in...
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...that all material in this coursework which is not my own work has been acknowledged and I am fully aware of the consequences of plagiarism. Signed | For Academic Registrar use only | Outline Introduction 3 I. Analyses of Key Macroeconomic Indicators 3 1. Growth Rate 4 2. Productivity growth 5 3. Output Gap 6 4. Unemployment Rate 6 5. Inflation Rate 8 6. Trade 8 II. Interrelationships between key macroeconomic indicators 9 1. Growth and Unemployment, Okun's Law 9 2. Inflation-Unemployment Tradeoffs, the Philip curve 10 Conclusion 11 Bibliography 11 Introduction Over the years a great deal of works have been devoted to improve the economic performance of one of the sub-Saharan African country, located in the territory of Northern Rhodesia, Zambia. The country gained independence from the British in 1964, and started to operate and be counted as a separate economy. This empirical study analyses the available annual data on key macroeconomic indicators of Zambia for the period from 2000 to 2012 years, and explains the interrelation between these indicators with the help of important macroeconomic theories. I. Analyses of Key Macroeconomic Indicators As it is noted in macroeconomic textbooks, the nation's overall macroeconomic performance matters, not its own sake but because many individuals experience its consequences. The assumption that these connections between the overall economy and the lives of individuals are reflected in data...
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...rainfall which caused damage in Haiti. The insurance helped the borrowers to pay back the outstanding debt, have access to another loan to rebuild their lives, and receive small compensation for loss of property. This example demonstrates the positive influence on viability of micro finance products to support a sustainable economic growth in developing countries. According to the 2009 MFI benchmarks provided by Microfinance Information Exchange (MIX)1, Latin American and the Caribbean (LAC) region has the largest FMIs number as well as yield on gross portfolio among four continents. (Figure 1) Even though microfinance has its long history, which can be traced back to the 1970s, and the mechanism was gradually improved, sustaining the operation and keep its long-term stability is one of the key issues for MFIs. To assess the degree how the global financial crisis impacts on MFIs’ sustainability in developing countries, MFIs’ cash inflow and outflow should be taken into consideration. ________________________________ 1 http://www.mixmarket.org/ MIX collects and validates...
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...Review of Keynesian Economics, Inaugural Issue, Autumn 2012, pp. 1–4 Statement of the Co-Editors Economics and the economic crisis: the case for change It is widely recognized that economic crises can sometimes trigger enormous change, with regard to both economic theory and the politics of governance. Today, the global economy is struggling with the fall-out from the financial crash of 2008 and the Great Recession of 2007–2009. The economic crisis that these events have generated, combined with the failure of the mainstream economics profession, has again put the question of change on the table. The economics profession stands significantly discredited owing to its failure to foresee the recession and the financial crash, its repeated over-optimistic forecasts of rapid recovery, and the lack of plausibility surrounding its attempts to explain events. Reasonable people do not expect economists to predict the daily movements of the stock market, but they do expect them to anticipate and explain major imminent economic developments. On that score, the profession failed catastrophically, revealing fundamental theoretical inadequacies. This intellectual failure has prompted us to launch the Review of Keynesian Economics. At a time of journal proliferation, some may wonder about the need for another journal. We would respond there is a proliferation of journals, but that proliferation is essentially within one intellectual paradigm. As such, it obscures the fact that the range...
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...Macroeconomics Chapter 1 What Is Macroeconomics? 1.1 How Macroeconomics Affects Our Everyday Lives 1) Macroeconomics is the study of A) the economic issues which affect individual well-being and individual firms' profit levels. B) the economic issues which affect foreign and domestic prices of related goods and services. C) inflation and poverty at the level of the household. D) the economic issues which affect the nation's total income, employment, and output. Answer: D Question Status: New 2) Political incumbents often gain or lose re-election because of a strong or weak economy. Which of the following is an exception to that rule? A) Al Gore B) George H.W. Bush C) Jimmy Carter D) Herbert Hoover Answer: A Question Status: Previous Edition 3) The "Big Three" concepts of Macroeconomics are A) profits, liquidity, and sustainability. B) unemployment rate, inflation, and economic growth. C) asset rebalancing, markups, and profitability. D) federal budget, foreign trade, and quantitative easing. Answer: B Question Status: New 4) Economy with no productivity growth is called the A) zero-sum society. B) zero-growth society. C) export-led society. D) doomed-to-fail society. Answer: A Question Status: New 5) The inflation rate is the A) measure used to calculate the price level. B) measure used to calculate the cost of borrowing money. C) percentage increase in the average level of prices. D) percentage increase in the average...
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...1. Critically examine the effectiveness of various approaches that may be used to reduce macroeconomic instability. According to Mc Vaish (Macroeconomics theory, p123) Macroeconomics can be defined as the analysis of the economy wide aggregates such as the analysis of the total output and employment, total consumption, total investment, total saving and national product. Macroeconomic theory employs technique of general equilibrium in order to study the determination of the general price level, money supply, total employment and output levels and fluctuations in these aggregates magnitudes. A macroeconomic stable environment can be defined as one in which inflation is low and predictable, the exchange rate is near its equilibrium level, the government budget is well managed, the budget deficit relative to GDP is at a reasonable level and the use of central bank credit to finance the budget deficit is kept at a minimal level. Macroeconomic stability sends important signals to the private sector about the direction of economic policies and the credibility of authorities’ commitment to manage the economy efficiently. Such stability, by facilitating long term planning and investment decisions, encourages savings and capital accumulation by the private sector. Macroeconomic instability takes place in two forms namely exogenous shocks and inappropriate policies. Exogenous shocks (such as reversal capital flows, terms of trade and natural disasters) require compensatory action...
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...Chapter 5: Government Expenditure and Revenue by Ooi Soon Beng After studying this chapter, you should be able to understand: Public Budget Budget Deficits and Surplus Expansionary and Contractionary Fiscal Policy Discretionary and Automatic Fiscal Policy National Debts and Its Issues and Misconceptions Problems with Fiscal Policy : Macroeconomics According to Keynes, government has to intervene to stabilize the economy. Stabilization can be achieved in part by manipulating the Public Budget to increase output and employment or to reduce inflation. The Budget outlines the government’s taxation and expenditure plans for the coming fiscal year. The Ministry of Finance are responsible for the preparation of the budget. Sources of Revenues: Direct taxes on individuals and companies Indirect taxes on goods and services (gasoline, alcohol, tobacco, etc) Non-tax revenue (stamp duty, licenses, permits, etc) Malaysia: Sources of Revenue (in RM) 1990 2013 2014 Direct Taxes 35.2% 56.5% 59.1% Indirect Taxes 36.7% 16.6% 17.2% Non-Tax Revenue 28.0% 26.9% 23.7% Total Revenue 29,521m 207,913m 224,094m Source: Ministry of Finance Categories of Expenses: Operating Expenditure (emolument, pensions, debt servicing, grant to states, subsidies, supplies, scholarships, etc) Development Expenditure (security, social services, economic services, expenditure ...
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...| Debt Management Program in the Philippines | The first debt and debt service reduction operation the World Bank financed was the Debt Management Program Loan to the Philippines, approved in 1990. Its main objective was to help restore the Philippines' creditworthiness by reducing the destabilizing pressures exerted by an excessive debt-service burden. The government, having inherited a huge debt service obligation, formulated a debt restructuring program for the country and a request for debt-relief from creditors, with assistance from the Bank and the IMF. Several events helped improve the Philippines' creditworthiness. Three of them are particularly relevant to the operation. First, the government adopted a program of deep structural and macroeconomic reform. Second, it reduced the debt stock by about $650 million equivalent, or about 2.3 percent of its outstanding debt at the time, using Bank and IMF financing to buy back $1.46 billion of debt from commercial banks at 50 percent discount. And finally, by signaling confidence in the Philippines' commitment to sound macroeconomic reform, the Debt Management Loan opened up international financial markets for the country. However, the program's success also led to a new problem. It encouraged new loans and other inflows of capital, which eventually became a major source of monetary problems and instability. The resulting increase in inflation forced the government to rein in the economy, suppressing growth; the currency...
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