Introduction Flashcards
What is the great financial crisis
The 2008 financial crisis
In a metaphorical sense can economies get sick and what does macroeconomics have to do with it
One could say that an economy is sick when there is high unemployment, recession, financial crisis or low growth and macro economics is the study of what to do about it
How did the gfc spread from the US
Through trade as the US could not import and through finance as US banks pulled back their investments
What caused the gfc
Us banks lent out mortgages willy nilly and packaged them into complex securities so when it turned out that the mortgages were more worth then the recoverable amount trust collapsed as everyone knew there was a lot of trash and people could not distinguish it
What was the euro crisis
Some European countries had acquired much debt and ran on deficits so when the creditors wanted back their money in the gfc they implemented austerity and output decreased drastically
What is the euro area
The area that uses the euro
How large is the economy of the EU
0.9 US
What characterizes the euro area after the gfc
Anemic growth, quite high unemployment 8,3% and too low inflation generally below 2%.
How do experts think the Eurozone could reduce its unemployment
By eliminating labor market rigidities aka less worker protection and unemployment insurance or to look into why some countries that have these still have high employment.
What are the benefits if the euro
A symbolic proof of unity and an end to war on the continent and an increased ease of exchange.
What are the shortcomings of a common currency
A single currency means a single monetary policy which might be detrimental to the continents differing economies.
What metrics do economists look at when determining the health of an economy
Output growth, unemployment and inflation rate
What are the two main topics for us economic policy makers
If the us policymakers have the necessary tools at their disposal to handle a recession and how to increase their productivity even further
How can the fed influence a recetion
By decreasing the interest rate they make more cash available at a lower price which stimulates demand and decreases unemployment while increasing output
What is the zero lower bound
That interest rates cannot be lower then zero as no one would buy bonds worse than cash
