Notes Drawn from Pp. 114-125. (Click Me Please, Notes)

What was the essential message of the laissez-faire doctrine, and what event brought it to an end?

Why did neoclassical economists believe the overall economy could not fail?

What are counter cyclical forces? How are they supposed to work?

What does Say's Law claim? What is the reasoning behind this claim?

What is the theoretical justification of Say's Law?

What, according to neoclassical economists, is the GDP composed of, and how contrary to Keynes' position?

Can you explain why neoclassical economists believed savings will return to production?

What, according to neoclassical economists, determines the interest charged on borrowing?

What was neoclassical economists' position regarding fluctuations in the economy?

What event brought an end to the Great Depression, and why?

Who introduced macroeconomics, and when?

On what aspect of fluctuations did Keynes agree with the neoclassical economists?

What was Keynes' advice to both Presidents Hoover and Roosevelt?

What did Keynesian economists conclude about the New Deal programs?

How did Keynes advise on using G to stabilize the economy?

Can you name four historical events or economic trends that support fiscal policy?

What did Keynes teach regarding (a) full employment,(b) interest rates,(c) business cycles, and (d) prices and wages?

What did Keynes mean by unemployment equilibrium?

What is the general consensus on government economic management today?

Why is the Full Employment Act of 1946 revolutionary for macroeconomics?

What economic responsibility did this Act impose on the president?

Chapter Five (Ch.12)

Which US presidents have engaged in economic macromanagement since WW II, and why?

What are the three broad government interventionist policies?

Which two government interventionist policies combine to form macroeconomics?

Is any of the three sets of government interventionist policies perfect, or without cost?

What is the overriding motivation behind all market interventionist policies?

What is monetary policy? And which particular variable is it designed to influence?

Why does the value of money change?

What is meant by the scarcity of money?

What does the demand for money mean?

What happens to the value of money if its demand increases?

What change does government policy seek in the demand for money as a tool against recession?

Why would a decrease in the demand for money be necessary to fight inflation?

Which public institution carries out the government's monetary policy?

Why is the banking system yet another evidence of the extensiveness of political economy?

Which are the four major components in the banking system necessary for monetary policy?

What is the Fed?

Which is the most important decision making body within the Fed?

Is the fed the only bank regulatory and supervisory body in the country?

Which is the Federal Reserve Bank responsible for your Federal Reserve Banking district?

Are all commercial banks in the country members of the Federal Reserve System?

Name and explain the four considerations that determines the rate of savings.

What makes a piece of paper a legal tender?

What is the logic behind banking?

What is the role of commercial banks in monetary policy?

What must commercial banks do to retain the confidence of their customers at all times?

What is the reserve ratio?

How does the Fed's reserve requirement help to regulate and sustain the value of money?

What change in reserve requirements will the Fed make to fight inflation, and why?

Will the Fed require the same percentage of reserve requirements from all commercial banks?

What is the difference between the discount and interest rates?

What is tight monetary policy and when does the Fed pursue this policy?

What are open market operations? What is the Fed selling or buying in open market operations?

To fight inflation, will the Fed sell or buy IOUs? And why?

Why is monetary policy more effective against inflation than against recession?

Why is monetary policy seen as politically neutral?

Why might monetary policy be ineffective against stagflation?

What constraint doe the national debt impose on monetary policy?

What three instruments are opened to government under fiscal policy?

What is deficit financing?

Differentiate between discretionary and nondiscretionary fiscal policy?

What is progressive taxation? And why is it an instrument for wealth redistribution?

How does income redistribution contribute to economic stabilization?

Which political groups think the government should adopt a straight bookkeeping approach?

Why would fiscal policy be particularly effective in the US economy?

How does Maynard Keynes defend deficit financing?

What does fine-tuning the economy mean? And why is it increasingly difficult to accomplish?

What percentage of the national budget is flexible and open to fiscal policy manipulation?

How does the private sector respond to fiscal policy?

Why is fiscal policy so politically sensitive?

What are price rigidities, and why are they a constraint on fiscal policy?

Describe the crowding-out effect of government borrowing.

Are fiscal policy's long time lags avoidable?

What is economic interdependence, and which three ways does it affect US fiscal policy?

What are international currency flows? Why are they over 70 percent denominated in US dollars?

How does the existence of huge amounts of US dollars outside its borders affect its fiscal policy?

Describe the macroeconomics crisis that gave rise to supply-side economics in the early 1980s.

What is supply-side economics? How does it compare with monetary and fiscal policy?

According to supply-siders, how would tax cuts led to economic growth and stability?

What positive things is deregulation supposed to bring to the economy?

Provide a brief description of the six-point agenda that came to be known as Reaganomics.

Why was Reagan's deficit financing the 40 percent increase in defense contrary to supply-side logic?

What accounts for the explosion of the national debt during the 1980s?

What forced President Reagan to abandon deregulation towards the end of the 1980s?

What is the Reagan record on wealth redistribution?