Preliminaries: Theory

Question 1

what are the three viable routes to assess the causal effect of chnaging X on Y

Answer 1

-actual experiment
-natural experiment
-theory

Question 2

actual experiment

Answer 2

controlled environment in which only the explanatory variable of interest X is varied randomly

Question 3

example of actual experiment

Answer 3

vaccine trials

Question 4

natural experiemnt

Answer 4

uncontrolled environment with properties akin to an actaul experiemnt

Question 5

example of natural experiment

Answer 5

effect of minimum wage on employment

Question 6

theory

Answer 6

controlled but hypothetical environment

Question 7

what are macroeconomists and the Fed forced to use to assess causality

Answer 7

theory

Question 8

what is a model

Answer 8

a set of theoretical assumptions designed to mimic, explain and/or predict certain avts bserved in the real world

Question 9

models ability with abstraction

Answer 9

reduce reality down to a minimal set of assumptions to allow meaningful analysis of a particlar question at ahnd

Question 10

do assumptions need to be realistic to be useful

Answer 10

no

Question 11

what usually makes an assumptino useful

Answer 11

lack of realism, because it allows s to focus on our object of interest

Question 12

when should an assumtion be realistic

Answer 12

if and only if realism is actually relevant in the context of the question at hand

Question 13

balanced growth path

Answer 13

a trajectory such that all variables grow at a constant rate.

Question 14

what do models of economic growth commonly abstract from

Answer 14

short run phenomena such as monetary policy

-b/c in the long run per capita output is largely determined by caoital accumulation and tech advancemnet

Question 15

what do business cycle models abstract from

Answer 15

long run phenomena like capital accumulation and tech advancement b/c in short run the capital stock and prevailing tech are fixed