Chapter 13 An Introduction to Macroeconomics

Question 1

What are the markets of macroeconomics?

Answer 1

Output
Financial
Labor
Foreign Exchange

Question 2

What is general equilibrium analysis?

Answer 2

simultaneous equilibrium in all markets

Question 3

What is partial equilibrium analysis?

Answer 3

market-clearing price and quantity in one market without considering the implications for other markets

Question 4

Describe the classical school of thought and who was behind it

Answer 4

1776 - 1930s
Adam Smith in “Wealth of Nations”
Markets reach equilibrium on their own and there is no role for government intervention

Question 5

Keynesian school of thought

Answer 5

1930’s - 1970’s
Emphasis on sticky prices
Markets need help reaching equilibrium so there is a role for government intervention
“In the long run, we’re all dead”

Question 6

Monetarist school of thought

Answer 6

1970’s

Can’t use money supply to control output

Question 7

Rational Expectations

Answer 7

People use all of the available information to form their expectations