Exam 39: Current Issues in Macro Theory and Policy

A coordination failure is said to occur when people do not reach a mutually beneficial equilibrium because they lack some way to jointly coordinate their actions to achieve it.

Mainstream macroeconomics would suggest that fiscal policy

According to monetarists, discretionary monetary policy has been a major source of economic instability.

(Consider This) According to economist Abba Lerner (1903-1982), fiscal and monetary policy is analogous to

Rational expectations theory suggests that people make consistent forecasting errors regarding the effects of policy.

If the money supply growth is set at a slower pace than the growth of real GDP, then inflation will occur.

An efficiency wage is

If there is an unanticipated increase in aggregate demand, then according to new classical economics, the economy will self-correct with a(n)

The real-business-cycle theorists see aggregate supply as the "active" factor in causing business cycles and aggregate demand as a "passive" factor.

In comparing monetarism and rational expectations theory, we find that

Mainstream economics views monetary policy as a

If the money supply is constant when both nominal and real GDP are rising, we can conclude that

A higher wage could result in a lower labor cost per unit of output than a lower wage if the higher wage

The velocity of money measures the

The mainstream view is that macro instability is caused by

If M is $400, P is $4, and Q is 300, then V must be

The most likely advocates for a monetary rule would be

From the mainstream perspective, instability in the economy is due to

If prices and wages are inflexible downward, a decrease in aggregate demand will

In real-business-cycle theory, changes in the