Brainscape's Knowledge GenomeTM

Browse over 1 million classes created by top students, professors, publishers, and experts.


See full index

AP Economics > Disputes In Macro Theory > Flashcards

Disputes In Macro Theory Flashcards

1
Q

What are the main views of classical theorists?

A

The economy is self correcting and there are downward flexible wages and prices

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

What are the views of monetarists?

A

They focus on money supply, they believe the market is highly competitive, and that competition gives the market stability

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

What are the beliefs of classical theorists on wages and prices?

A

They are downward flexible

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

What do classical theorists believe about gov intervention in the economy??

A

They believe in laissez afire economics

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

What do classical theorists believe is the problem with the economy?

A

Government intervention using discretionary fiscal policy

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

What is the policy rule?

A

It prevents the government from managing AD

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

What is this the monetary rule?

A

The FED expands the money supply at a fixed rate each year

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

What do classical theorists believe about a balanced budget?

A

Pro-balanced budget

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

Who supports the monetary and policy rule?

A

Classical theorists

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

Classics theorists believe that if wages aren’t downward flexible it’s the governemnt’sfault because of?

A

Minimum wage laws, pro Union legislation, pro monopoly legislation, discretionary fiscal policy, and social programs

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

In a classical theory graph AS is

A

Vertically sloped

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

In a classical theory graph AD is not

A

Downward sloping

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

In classical theory a decrease is AD doesn’t change output only changes

A

Price level

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

What are the main beliefs in Keynesian theory?

A

The economy isn’t self correcting and the economy can get stuck in period of underspending indefinitely

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

What do Keynesian theorists believe can fix the economy?

A

The givenerment using fiscal and monetary policy

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

What do Keynesian theorists believe about prices and wages?

A

They are downward inflexible

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

What do Keynesianism believe cause economic instability ?

A

Changes in investment spending and supply shocks

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

Are Keynesian theorists for or against the policy and monetary rule?

A

Against

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
19
Q

Are Keynesianism for or against a balanced budget?

A

Against

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
20
Q

In a Keynesian theory graph AS is

A

Horizontal up to a point and then it’s vertical

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
21
Q

In a Keynesian graph AD

A

Is down sloping

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
22
Q

In Keynesian theory a decrease in AD causes no change in price level, and

A

A decrease I output

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
23
Q

For classical viewers what caused instability of AD?

A

Wars, droughts, panics, and gold rushes

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
24
Q

According to Keynesian viewers instability comes with changes in Investment spending which causes

A

Demand pull inflation

25
Q

According to Keynesian viewers changes in the money supply cause instability which causes

A

Cost push inflation

26
Q

Keynesian view is also called?

A

Mainstream view

27
Q

What is the equation of exchange?

A

MV=PQ

28
Q

What does MV mean?

A

The nations money supply times the # of times spent

29
Q

What is PQ?

A

Nominal GDP

30
Q

MV represents the

A

Total amount spent

31
Q

PQ represents the

A

Total amount received by sellers

32
Q

What is M?

A

The supply of money

33
Q

What is V?

A

Velocity; the # of times the average dollar is spent in a year

34
Q

What is Q?

A

The amount of g/s purchased

35
Q

What is P?

A

Price level

36
Q

What does the equation do exchange mean?

A

The dollar value of total spending must equal the dollar value of total output

37
Q

What do rational expectation theorists believe?

A

Unanticipated PL changes cause changes in GDP in the short run but not the long run, and that people anticipated PL changes and act appropriately so no real change in GDP occurs

38
Q

What do Keynesian theorists believe about downward inflexible wages?

A

They a re caused by wage contracts and minimum wages laws; firms don’t want to lower wages and risk low morale or losing skilled workers

39
Q

What doe Keynesian theorists believe about efficient wage theory?

A

The Benefits of paying higher wages ar greater work effort, lower supervision costs, and reduced loss of skilled workers

40
Q

What do Keynesian theorists believe about insider-outsider relationships?

A

They keep wages up

41
Q

What is an insider outsider relationship?

A

Insiders=those who are contracted and won’t lose job

Outsiders= those who lose job during times of recession

42
Q

What are the two assumptions of rational expectation theory?

A

People have adequate info to predict outcomes and behave rationally; and the economy is competitive, and prices and wages are flexible both up and down

43
Q

What does the real business cycle suggest?

A

Macro instability is caused by real factors that affect AS; and that business fluctuations result from significant changes in technology and resource availability

44
Q

What do Keynesians think of the private economy?

A

It is potentially unstable

45
Q

What do Keynesians believe cause instability?

A

Changes in AD and AS shocks

46
Q

What do Keynesians believe is appropriate macro policy?

A

Fiscal and monetary policy

47
Q

What do Keynesians believe about the velocity of money?

A

It is unstable

48
Q

What do monetarists believe about the private economy?

A

It is stable in the long run at Qf

49
Q

What do monetarists believe about the cause of instability?

A

Inappropriate monetary policy

50
Q

What do monetarists believe is appropriate macro policy?

A

Monetary rule

51
Q

What do monetarists believe about the velocity of money?

A

It is stable

52
Q

What do RETs believe about the private economy?

A

It is stable in the long run at Qf

53
Q

What do RETs believe is the cause of instability?

A

Unanticipated AD and AS shocks in the short run

54
Q

What do RETs think is appropriate macro policy?

A

Monetary rule

55
Q

What do supply siders think about the private economy?

A

It may stagnate without work, savings, and investment incentives

56
Q

What do supply siders think is the cause of instability?

A

Changes is AS

57
Q

What do supply siders view as appropriate macro policy?

A

Policy to increase AS

58
Q

Who are supporters of classical theory?

A

Monetarists, Rational Expectation Theorists, and Supply riders

AP Economics (19 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2024 Bold Learning Solutions. Terms and Conditions