Chapter_19 Big Events The Economics多恩布什宏观经济学(教学课件)PPT

小学上册英语第二单元期中试卷英语试题一、综合题(本题有50小题，每小题1分，共100分.每小题不选、错误，均不给分)1 A __________ is a mixture that can be separated by filtration.2 What color is a stop sign?A. YellowB. GreenC. RedD. Blue答案: C3 The sea turtle lays its eggs on the ________________ (沙滩).4 A whale is a ______ that lives in the ocean.5 I keep a journal to write about my ________ (梦想) and aspirations for the future.6 What is the opposite of 'happy'?A. JoyfulB. SadC. ExcitedD. Angry答案:B7 What do you call a group of wolves?A. PackC. ColonyD. Swarm8 My sister enjoys __________ (野营).9 A cat's purring is often a sign of ________________ (放松).10 A ____ is often found resting on leaves during the day.11 What is 8 3?A. 4B. 5C. 6D. 7答案: B12 My dad drives a _____ (car/bike).13 _____ (饲料) is made from certain types of plants.14 The chemical formula for nitric acid is ______.15 The __________ of a fish can help it steer while swimming.16 What do you call a story that is passed down through generations?A. FolktaleB. LegendC. MythD. Fable答案:A17 What is the name of the famous wizarding school in Harry Potter?A. HogwartsB. NarniaD. Middle-Earth答案:A18 What is the opposite of empty?A. FullB. VacantC. UnoccupiedD. None of the above答案:A19 The ______ (蝴蝶) flew over the flowers. It was very ______ (美丽).20 The garden is full of ________ (植物).21 We have a _____ (test/exam) on Friday.22 What shape has three sides?A. SquareB. TriangleC. CircleD. Rectangle23 My friend is _______ (在弹吉他).24 Fermentation produces alcohol and ______.25 I enjoy ______ (参加) school clubs.26 My friend is a skilled __________ (艺术家) with a unique style.27 What is the largest bird in the world?A. EagleB. PenguinC. Ostrich答案:C28 What do you call a group of bees?A. SwarmB. PackC. FlockD. Colony答案: A29 A _____ (植物园) showcases various species.30 She is a historian, ______ (她是一名历史学家), preserving important stories.31 The Crab Nebula is a famous ______ remnant.32 The process of heating something to kill bacteria is called ______.33 I like to ___ (listen) to podcasts.34 What do we call a written work that tells a story?A. PoemB. NovelC. EssayD. Article35 Fire of London led to new ________ (建筑规范). The Grea36 In a chemical reaction, the total mass of the reactants equals the total mass of the _____.37 A telescope helps us see ______ in the sky.38 The capital of Togo is __________.39 The Amazon River Basin is home to many _______ species.40 What is the capital of Mexico?B. GuadalajaraC. TijuanaD. Mexico City答案: D41 My parents encourage me to be ______ (诚实) and kind to others. It's important to treat people with ______ (尊重).42 Which sport is played on ice?A. SoccerB. BasketballC. HockeyD. Tennis43 I enjoy playing ________ (桌游) on rainy days.44 I can ______ (make) a sandwich by myself.45 What is the term for a young male goat?A. KidB. BuckC. BillyD. Ram46 The stars are ___ (shining/dimming).47 The ______ (植物分类法) organizes different species.48 What is 2 + 3?A. 4B. 5C. 6D. 749 My dad encourages healthy __________ (生活方式).50 Caterpillars eat a lot before becoming ______.51 The _______ (Age of Exploration) led to the discovery of new lands and trade routes.52 My favorite way to relax is ______.53 Chemical reactions can be classified as ________ or endothermic.54 The first successful vaccine was developed by __________ (爱德华·詹纳).55 The capital of the Philippines is _____.56 What do we call the study of birds?A. OrnithologyB. ZoologyC. BotanyD. Ecology答案: A57 The ancient Greeks believed in many _______.58 The peacock has beautiful _______ (羽毛).59 Cleopatra was the last active ruler of the __________. (埃及)60 What is the name of the famous bear created by A.A. Milne?A. PaddingtonB. Winnie-the-PoohC. Yogi BearD. Baloo答案:B61 The __________ (历史的交互) enhances engagement.62 The __________ (历史的图谱) illustrates progression.63 Which of these animals can live both in water and on land?A. FishB. FrogC. EagleD. Dog答案:B64 My aunt loves to cook ____ (southern cuisine).65 The _______ (Mayan calendar) predicted significant events in their culture.66 Which planet is known as the "Red Planet"?A. EarthB. MarsC. JupiterD. Saturn67 How many months are there in a year?a. 10b. 11c. 12d. 13答案:c68 What do we call the area of land where crops are grown?A. FarmB. GardenC. OrchardD. Ranch69 The wallaby is smaller than a ______ (袋鼠).70 The bat is a flying ______ (哺乳动物).71 The main source of energy for chemical reactions in living things is ______.72 We are going to ___ a party. (have)73 What do you call a story that is not true?a. Factb. Fictionc. Historyd. Biography答案:b74 My favorite activity is ______ (打篮球).75 My sister is having a birthday ____ (party) next week.76 What color are most bananas?A. GreenB. YellowC. RedD. Brown答案: B77 I want to ___ a story. (tell)78 It is _____ (raining) outside.79 What do we call the act of using your hands to create something?A. CraftingB. BuildingC. MakingD. All of the above80 Constellations can change depending on the ______.81 The bee gathers nectar from _______.82 The chemical formula for benzene is ______.83 What do you call the book that tells you about words?A. DictionaryB. EncyclopediaC. StorybookD. Novel答案: A84 In conclusion, my favorite season is ______ because it brings joy and happiness. I look forward to it every year!85 What is the primary language spoken in the USA?A. SpanishB. FrenchC. EnglishD. Chinese答案: C86 The capital of Thailand is __________.87 I read a ___ (book) before bed.88 What is the main ingredient in a salad?A. FruitB. LettuceC. MeatD. Bread答案:B89 What do you call the light that comes from the sun?A. MoonlightB. StarlightC. SunlightD. Firelight90 A gas that can be dissolved in water is called a ______ gas.91 The _____ (沙滩) is sandy.92 A homogeneous mixture is also known as a _______.93 The chemical symbol for yttrium is _____.94 What is the term for animals that can live both in water and on land?A. MammalsB. ReptilesC. AmphibiansD. Fish答案:C95 We created an obstacle course with ________ (玩具车) in the backyard. It was a fun ________ (挑战).96 What do we call the sweet substance made by bees?A. SyrupB. SugarC. HoneyD. Jam答案:C97 The _____ (flower/tree) is blooming.98 I share secrets with my __________. (朋友)99 What do we call a baby duck?A. ChickB. DucklingC. GoslingD. Calf答案: B100 My mom loves to __________ (和家人聚会).。

Macroeconomics R. GLENN HUBBARD COLUMBIA UNIVERSITY ANTHONY PATRICK O’BRIEN LEHIGH UNIVERSITY MATTHEW RAFFERTY QUINNIPIAC UNIVERSITY Boston Columbus Indianapolis New York San Francisco Upper Saddle RiverAmsterdam Cape Town Dubai London Madrid Milan Munich Paris Montreal Toronto Delhi Mexico City So Paulo Sydney Hong Kong Seoul Singapore Taipei TokyoAbout the AuthorsGlenn Hubbard Professor Researcher and Policymaker R. Glenn Hubbard is the dean and Russell L. Carson Professor of Finance and Economics in the Graduate School of Business at Columbia University and professor of economics in Columbia’s Faculty of Arts and Sciences. He is also a research associate of the National Bureau of Economic Research and a director of Automatic Data Processing Black Rock Closed- End Funds KKR Financial Corporation and MetLife. Professor Hubbard received his Ph.D. in economics from Harvard University in 1983. From 2001 to 2003 he served as chairman of the White House Council of Economic Advisers and chairman of the OECD Economy Policy Commit- tee and from 1991 to 1993 he was deputy assistant secretary of the U.S. Treasury Department. He currently serves as co-chair of the nonpar-tisan Committee on Capital Markets Regulation and the Corporate Boards Study Group. ProfessorHubbard is the author of more than 100 articles in leading journals including American EconomicReview Brookings Papers on Economic Activity Journal of Finance Journal of Financial EconomicsJournal of Money Credit and Banking Journal of Political Economy Journal of Public EconomicsQuarterly Journal of Economics RAND Journal of Economics and Review of Economics and Statistics.Tony O’Brien Award-Winning Professor and Researcher Anthony Patrick O’Brien is a professor of economics at Lehigh University. He received a Ph.D. from the University of California Berkeley in 1987. He has taught principles of economics money and banking and interme- diate macroeconomics for more than 20 years in both large sections and small honors classes. He received the Lehigh University Award for Distin- guished Teaching. He was formerly the director of the Diamond Center for Economic Education and was named a Dana Foundation Faculty Fel- low and Lehigh Class of 1961 Professor of Economics. He has been a visit- ing professor at the University of California Santa Barbara and Carnegie Mellon University. Professor O’Brien’s research has dealt with such issues as the evolution of the U.S. automobile industry sources of U.S. economiccompetitiveness the development of U.S. trade policy the causes of the Great Depression and thecauses of black–white income differences. His research has been published in leading journals in-cluding American Economic Review Quarterly Journal of Economics Journal of Money Credit andBanking Industrial Relations Journal of Economic History Explorations in Economic History andJournal of PolicyHistory.Matthew Rafferty Professor and Researcher Matthew Christopher Rafferty is a professor of economics and department chairperson at Quinnipiac University. He has also been a visiting professor at Union College. He received a Ph.D. from the University of California Davis in 1997 and has taught intermediate macroeconomics for 15 years in both large and small sections. Professor Rafferty’s research has f ocused on university and firm-financed research and development activities. In particular he is interested in understanding how corporate governance and equity compensation influence firm research and development. His research has been published in leading journals including the Journal of Financial and Quantitative Analysis Journal of Corporate Finance Research Policy and the Southern Economic Journal. He has worked as a consultantfor theConnecticut Petroleum Council on issues before the Connecticut state legislature. He has alsowritten op-ed pieces that have appeared in several newspapers including the New York Times. iii Brief Contents Part 1: Introduction Chapter 1 The Long and Short of Macroeconomics 1 Chapter 2 Measuring the Macroeconomy 23 Chapter 3 The Financial System 59 Part 2: Macroeconomics in the Long Run: Economic Growth Chapter 4 Determining Aggregate Production 105 Chapter 5 Long-Run Economic Growth 143 Chapter 6 Money and Inflation 188 Chapter 7 The Labor Market 231 Part 3: Macroeconomics in the Short Run: Theory and Policy Chapter 8 Business Cycles 271 Chapter 9 IS–MP: A Short-Run Macroeconomic Model 302 Chapter 10 Monetary Policy in the Short Run 363 Chapter 11 Fiscal Policy in the Short Run 407 Chapter 12 Aggregate Demand Aggregate Supply and Monetary Policy 448 Part 4: Extensions Chapter 13 Fiscal Policy and the Government Budget in the Long Run 486 Chapter 14 Consumption and Investment 521 Chapter 15 The Balance of Payments Exchange Rates and Macroeconomic Policy 559 Glossary G-1 Index I-1ivContentsChapter 1 The Long and Short of Macroeconomics 1WHEN YOU ENTER THE JOB MARKET CAN MATTER A LOT ........................................................ 11.1 What Macroeconomics Is About........................................................................... 2 Macroeconomics in the Short Run and in the Long Run .................................................... 2 Long-Run Growth in the United States ............................................................................. 3 Some Countries Have Not Experienced Significant Long-Run Growth ............................... 4 Aging Populations Pose a Challenge to Governments Around the World .......................... 5 Unemployment in the United States ................................................................................. 6 How Unemployment Rates Differ Across Developed Countries ......................................... 7 Inflation Rates Fluctuate Over Time and Across Countries................................................. 7 Econo mic Policy Can Help Stabilize the Economy .. (8)International Factors Have Become Increasingly Important in Explaining Macroeconomic Events................................................................................. 91.2 How Economists Think About Macroeconomics ............................................. 11 What Is the Best Way to Analyze Macroeconomic Issues .............................................. 11 Macroeconomic Models.................................................................................................. 12Solved Problem 1.2: Do Rising Imports Lead to a Permanent Reductionin U.S. Employment. (12)Assumptions Endogenous Variables and Exogenous Variables in EconomicModels ........................................................................................................ 13 Forming and Testing Hypotheses in Economic Models .................................................... 14Making the Connection: What Do People Know About Macroeconomicsand How Do They KnowIt .............................................................................................. 151.3 Key Issues and Questions of Macroeconomics ............................................... 16An Inside Look: Will Consumer Spending Nudge Employers to Hire................................ 18Chapter Summary and Problems ............................................................................. 20 Key Terms and Concepts Review Questions Problems and Applications Data Exercise Theseend-of-chapter resource materials repeat in all chapters.Chapter 2 Measuring the Macroeconomy 23HOW DO WE KNOW WHEN WE ARE IN ARECESSION ........................................................... 23Key Issue andQuestion .................................................................................................... 232.1 GDP: Measuring Total Production and Total Income ..................................... 25 How theGovernment Calculates GDP (25)Production and Income (26)The Circular Flow of Income (27)An Example of Measuring GDP (29)National Income Identities and the Components of GDP (29)vvi CONTENTS Making the Connection: Will Public Employee Pensions Wreck State and Local Government Budgets.................................................................... 31 The Relationship Between GDP and GNP........................................................................ 33 2.2 Real GDP Nominal GDP and the GDP Deflator.............................................. 33 Solved Problem 2.2a: Calculating Real GDP . (34)Price Indexes and the GDP Deflator (35)Solved Problem 2.2b: Calculating the Inflation Rate ..........................................................36 The Chain-Weighted Measure of Real GDP ....................................................................37 Making the Connection: Trying to Hit a Moving Target: Forecasting with “Real-Time Data” .................................................................................. 37 Comparing GDP Across Countries................................................................................... 38 Making the Connection: The Incredible Shrinking Chinese Economy ................................ 39 GDP and National Income .............................................................................................. 40 2.3 Inflation Rates and Interest Rates ....................................................................... 41 The Consumer Price Index .............................................................................................. 42 Making the Connection: Does Indexing Preserve the Purchasing Power of Social Security Payments ................................................................ 43 How Accurate Is theCPI ............................................................................................... 44 The Way the Federal Reserve Measures Inflation ............................................................ 44 InterestRates .................................................................................................................. 45 2.4 Measuring Employment and Unemployment .. (47)Answering the Key Question ............................................................................................ 49 An Inside Look: Weak Construction Market Persists.......................................................... 50 Chapter 3 The Financial System 59 THE WONDERFUL WORLD OFCREDIT ................................................................................... 59 Key Issue and Question .................................................................................................... 59 3.1 Overview of the Financial System ...................................................................... 60 Financial Markets and Financial Intermediaries ................................................................ 61 Making the Connection: Is General Motors Making Cars or Making Loans .................... 62 Making the Connection: Investing in the Worldwide Stock Market . (64)Banking and Securitization (67)The Mortgage Market and the Subprime Lending Disaster (67)Asymmetric Information and Principal–Agent Problems in Financial Markets...................68 3.2 The Role of the Central Bank in the Financial System (69)Central Banks as Lenders of Last Resort ..........................................................................69 Bank Runs Contagion and Asset Deflation ....................................................................70 Making the Connection: Panics Then and Now: The Collapse of the Bank of United States in 1930 and the Collapse of Lehman Brothers in2008 (71)3.3 Determining Interest Rates: The Market for Loanable Funds and the Market forMoney .......................................................................................... 76 Saving and Supply in the Loanable Funds Market ........................................................... 76 Investment and the Demand for Loanable Funds ............................................................ 77 Explaining Movements in Saving Investment and the Real Interest Rate (78)CONTENTS .。

Macroeconomics, 7e (Blanchard)Chapter 24: Epilogue: The Story of Macroeconomics24.1 Keynes and the Great Depression1) Which of the following statements about Keynes' contribution to macroeconomics is correct?A) Although he published his most important ideas about the economy long before the 1930s, few economists paid attention to Keynes until the Great Depression proved him correct.B) Keynes argued that depressions and recessions were almost always caused by changes in the money supply.C) Keynes argued that balancing the budget could be an effective way to cure a recession or depression.D) all of the aboveE) none of the aboveAnswer: EDiff: 12) According to Keynes,A) the Great Depression was caused by ill-considered expansionary fiscal policy.B) balancing the budget in the midst of a depression would be a serious mistake.C) inflation is always and everywhere a monetary phenomenon.D) the Phillips curve is stable.E) none of the aboveAnswer: BDiff: 13) Liquidity preference refers toA) Keynes' name for the demand for money.B) the "random walk" behavior of consumption spending.C) monetarists explanations for stagflation.D) real business cycle theorists' explanations for stagflation.E) the controversy sparked by the Lucas critique.Answer: ADiff: 14) "In the long run, we're all dead" was Keynes' way of saying thatA) intellectual pursuits, like understanding the economy, are unimportant in the scheme of things.B) no one would appreciate his theories during his lifetime.C) there is no point in saving for retirement.D) it is very important to save for one's retirement.E) none of the aboveAnswer: EDiff: 15) "Effective demand" represents which of the following?A) money demandB) demand for exportsC) domestic demandD) the demand for laborE) aggregate demandAnswer: EDiff: 16) Liquidity preference refers to the theory ofA) money demand.B) consumption.C) investment.D) expectations.Answer: ADiff: 124.2 The Neoclassical Synthesis1) The neoclassical synthesisA) was a name coined by Keynes himself for his new theories.B) rejected virtually all of Keynes' insights.C) held that econometric models of the economy could not be used to predict the future.D) held that economy always operated at or very near the natural rate of unemployment.E) was the dominant school of thought among economists in the 1950s and 1960s. Answer: EDiff: 12) Which of the following was not part of the neoclassical synthesis?A) the IS curveB) the LM curveC) the Phillips curveD) aggregate demandE) rational expectationsAnswer: EDiff: 13) Which of the following schools of thought advised against fine-tuning, due to our limited understanding of the economy?A) MonetaristB) KeynesianC) New KeynesianismD) New growthE) NeoclassicalAnswer: EDiff: 14) The intellectual leader of the monetarists wasA) Robert Lucas.B) Milton Friedman.C) John Maynard Keynes.D) Paul Romer.E) John Taylor.Answer: BDiff: 15) In the 1960s, the monetarist school of thought held thatA) monetary and fiscal policy could explain most of the output fluctuations in U.S. history.B) there is a long-run tradeoff between inflation and unemployment.C) efforts to fine-tune the economy are likely to do more harm than good.D) all of the aboveE) none of the aboveAnswer: CDiff: 16) If the IS curve is relatively steep, thenA) there can be no long-run tradeoff between inflation and unemployment.B) monetary policy cannot be very effective in changing GDP.C) rational expectations theory is probably correct.D) Ricardian equivalence most likely holds.E) budget deficits will not affect future capital accumulation.Answer: BDiff: 17) During the 1970s and 1980s, macroeconomists were busy integrating the insights of which of the following into their ideas about the economy?A) real business cycle theoryB) Keynesian theoryC) supply side economicsD) classical macroeconomicsE) none of the aboveAnswer: EDiff: 18) The neoclassical synthesis had emerged by what decade?A) 1930sB) 1940sC) 1950sD) 1960sE) 1990sAnswer: CDiff: 19) The IS-LM model was developed byA) Friedman and Phelps.B) Hicks and Hansen.C) Modigliani and Friedman.D) Lucas and Sargent.E) none of the aboveAnswer: EDiff: 110) The theories of consumption were developed byA) Friedman and Phelps.B) Hicks and Hansen.C) Modigliani and Friedman.D) Lucas and Sargent.Answer: CDiff: 111) The theories of investment were developed byA) Friedman and Phelps.B) Hicks and Hansen.C) Modigliani and Friedman.D) Lucas and Sargent.E) Tobin and Jorgenson.Answer: EDiff: 112) Which of the following argued that the Great Depression was caused by monetary factors?A) Friedman and SchwartzB) Hicks and HansenC) Modigliani and FriedmanD) Lucas and SargentE) Tobin and JorgensonAnswer: ADiff: 113) Explain several of the key contributions of Keynes.Answer: Obviously, answers to this question could be quite long. Answers should include topics like: the importance of expectations, business cycle theory, the importance of aggregate demand in causing fluctuations, liquidity preference, and the concept of the multiplier.Diff: 114) Explain what is meant by liquidity preference.Answer: Liquidity preference is the phrase Keynes gave to money demand.Diff: 115) Discuss what is meant by the neoclassical synthesis and explain how it emerged. Answer: This is the title given to what was believed to be the emerging consensus in economics.Diff: 116) In the 1960s, there was significant debate between Keynesians and monetarists. Explain several aspects of this debate.Answer: There were three key areas of this debate: (1) the relative importance of monetary and fiscal policy; (2) the perceived stability of the Phillips curve; and (3) the role of policy to stabilize the economy.Diff: 124.3 The Rational Expectations Critique1) Which of the following events led to the crisis in macroeconomics and to the development of rational expectations theory?A) the Great DepressionB) the stock market crash of 1987C) the stock market speculative bubble of the late 1990sD) stagflation in the 1970sE) large budget deficits in the 1980sAnswer: DDiff: 12) Milton Friedman attributed the Great Depression primarily toA) the government's failure to respond to an increase in the budget deficit.B) a reduction in the money supply.C) economists' and policy-makers' failure to acknowledge their limited knowledge.D) the failure of wages to rise.E) inaccurate expectations by consumers and firms.Answer: BDiff: 13) Which of the following is an implication of rational expectations theory?A) Deviations of output from the natural rate are likely to be serious and long-lived.B) The economy is like a complex machine, that needs to be optimally controlled with the proper policy.C) Macroeconometric models based on past behavior will not be very useful in formulating policy.D) Wages and prices are set almost entirely at random, so it is pointless to try to model their behavior.E) Business cycles almost always result from a shift in aggregate demand.Answer: CDiff: 14) Most economists would agree that, unless it incorporates rational expectations or something like it, a model cannot account forA) the Great Depression.B) shifts in aggregate supply.C) the relationship between consumption and income.D) the stagflation of the 1970s.E) the different initial impact of a permanent versus a temporary policy change.Answer: EDiff: 15) According to rational expectations theory, monetary policy will affect output only if it isA) anticipated.B) unanticipated.C) a very large change.D) a very small change.E) a policy that has been tried in the past.Answer: ADiff: 16) The staggering of wage and price decisions suggests thatA) people do not possess rational expectations.B) people do possess rational expectations.C) the economy will adjust slowly to shocks even if people possess rational expectations.D) the Lucas critique is entirely correct.E) real business cycle theory is correct.Answer: CDiff: 17) Which of the following argued that a long-run trade-off between inflation and unemployment could not exist?A) Friedman and PhelpsB) Hicks and HansenC) Modigliani and FriedmanD) Lucas and SargentE) Tobin and JorgensonAnswer: ADiff: 18) The steeper is the IS curve,A) the more effective is monetary policy.B) the less effective is monetary policy.C) the effectiveness of monetary policy does not change.D) a given change in the money supply will have a greater effect on output.Answer: ADiff: 19) As the IS curve becomes flatter, we know thatA) a given change in the money supply will cause a larger change in output.B) a given change in the money supply will cause a smaller change in output.C) a given change in the money supply will cause the same change in output.D) monetary policy becomes less effective.Answer: BDiff: 110) Stagflation refers toA) a reduction in inflation.B) a simultaneous reduction in inflation and reduction in unemployment.C) a liquidity trap.D) reduction in the price level and a reduction in the unemployment rate.E) none of the aboveAnswer: EDiff: 111) Which of the following led a strong attack against mainstream macroeconomists during the 1970s?A) Friedman and PhelpsB) Hicks and HansenC) Modigliani and FriedmanD) Lucas, Barro, and SargentAnswer: DDiff: 112) The research by Robert Hall on the theory of consumption suggests that the best forecast of consumption for next year would beA) unpredictable.B) random.C) this year's consumption.D) last year's consumption.Answer: CDiff: 113) The more staggered are labor contracts,A) the more rapidly the economy will adjust to changes in aggregate demand.B) the less rapidly the economy will adjust to changes in aggregate demand.C) the greater the inflationary effects of a given change in money growth in the medium run.D) the less inflationary effects of a given change in money growth in the medium run. Answer: ADiff: 114) The new classical interpretation of the economy suggests thatA) output is always above the natural level.B) output is always below the natural level.C) output is always equal to the natural level.D) recessions will not occur.Answer: CDiff: 115) The flatter is the IS curve,A) the more effective is monetary policy.B) the less effective is monetary policy.C) the effectiveness of monetary policy does not change.D) a given change in the money supply will have a smaller effect on output.Answer: BDiff: 116) As the IS curve becomes steeper, we know thatA) a given change in the money supply will cause a larger change in output.B) a given change in the money supply will cause a smaller change in output.C) a given change in the money supply will cause the same change in output.D) monetary policy becomes more effective.Answer: ADiff: 117) The less staggered are labor contracts,A) the more rapidly the economy will adjust to changes in aggregate demand.B) the less rapidly the economy will adjust to changes in aggregate demand.C) the greater the inflationary effects of a given change in money growth in the medium run.D) the less inflationary effects of a given change in money growth in the medium run. Answer: BDiff: 118) Discuss some of the implications of rational expectations.Answer: Answers should include a discussion of the implications of rational expectations on: (1) our understanding of the behavior of consumption and financial market variables; (2) the determinants of wage and price setting behavior; and (3) the theory, implementation, and effectiveness of policy.Diff: 119) First, what is the Lucas critique? Second, explain how it might relate to the implementation of monetary policy.Answer: The Lucas critique refers to the argument made by Robert Lucas that using existing macro models to make predictions about the effects of proposed policy would not be successful. These models' predictions were based on previous relationships that, as Lucas noted, would no longer hold as new policy is implemented. When monetary policy is implemented, these models might predict, for example, increases in output. However, as we now know, expectations of the effects of these policies would change.Diff: 124.4 Developments in Macroeconomics up to 2009 Crisis1) According to real business cycle theorists,A) fiscal policy explains most changes in output.B) price and wage rigidity explain most changes in output.C) efficiency wage theory explains wage rigidity.D) changes in output primarily represent changes in the natural level of output.E) fiscal policy explains most changes in efficiency wage theory.Answer: DDiff: 12) One problem with real business cycle theory is thatA) it is more successful in explaining expansions than in explaining contractions.B) it relies almost entirely on Keynes' original ideas, ignoring much of the progress made since then.C) it treats government officials as well-meaning public servants, despite much evidence to the contrary.D) it defines "productivity" in a new and not very intuitive way.E) its models downplay the importance of technological progress in the economy.Answer: ADiff: 13) Those economists who attempt to explain why wages and prices do not freely adjust would most likely beA) real business cycle theorists.B) new classical economists.C) new Keynesian economists.D) new growth theorists.E) none of the aboveAnswer: CDiff: 14) The existence of menu costs are often used to explain whyA) fiscal and monetary policies should be relatively effective.B) the price of services, like those provided by restaurants and barbers, rise at a faster rate than the price of goods, like automobiles and clothing.C) food prices tend to rise disproportionately rapidly in the consumer price index.D) price and wage adjustments will be relatively rapid.E) people prefer to look backward, instead of forward, when anticipating the future. Answer: ADiff: 15) If consumers are very foresighted, we would expect actual consumption spending toA) increase during recessions.B) increase during episodes of stagflation.C) have no relation to wealth.D) resemble a "random walk."E) be entirely predictable.Answer: DDiff: 26) A core belief of modern macroeconomics is that in the short run,A) fiscal policy is more effective in changing output than monetary policy.B) monetary policy is more effective in changing output than fiscal policy.C) fluctuations in aggregate demand affect unemployment.D) fluctuations in aggregate demand have no impact on the price level.E) the economy always operates at or near the natural rate of unemployment.Answer: CDiff: 17) A core belief of modern macroeconomics is that in the long run,A) a change in money growth will affect the level of output, but not its composition.B) a change in money growth will affect the composition of output, but not its level.C) output can deviate permanently from its natural level.D) a change in fiscal policy will not affect the composition of output.E) greater saving will result in greater output.Answer: EDiff: 18) One of the most important areas of disagreement among macroeconomists today is overA) the slope of the IS curve.B) the slope of the LM curve.C) the definition of consumption spending.D) the definition of government spending.E) none of the aboveAnswer: EDiff: 19) Both the new classical and new Keynesian models had in common the belief thatA) in the medium run, output returns to its natural level.B) output is always at its natural level.C) in the short run, output would likely deviate from its natural level.D) none of the aboveAnswer: ADiff: 110) The main debate during the 1960s wasA) between Keynesians and classicals.B) between new Keynesians and new classicals.C) between Keynesians and monetarists.D) between new Keynesians and monetarists.Answer: CDiff: 111) The intellectual leader of new classicals isA) Edward Prescott.B) John Taylor.C) Stanley Fischer.D) Ben Bernanke.Answer: ADiff: 112) Discuss new classical economics and real business cycle theory.Answer: New classical economics refers to that area of research where it is assumed that there is sufficient wage and price flexibility. It was a fairly logical extension of Lucas' work on rational expectations. Real business cycle theory attempts to explain fluctuations in output as changes in the natural level of output.Diff: 113) Explain what is meant by "new Keynesians" and discuss some of the research conducted in this area.Answer: New Keynesians focus on the implications of market imperfections such as nominal rigidities. This research has also focused on the determination of wages (e.g. efficiency wage theory). Others have focused on "menu costs" to explain why prices might not adjust as rapidly to clear product markets.Diff: 114) Briefly discuss new growth theory.Answer: New growth theory focuses on the determinants of technological progress and on the extent to which increasing returns to scale might exist.Diff: 115) Explain the menu cost explanation of output fluctuations.Answer: Each wage setter or price setter is largely indifferent as to when and how often he changes his own wage or price. Therefore, even small costs of changing prices can lead to infrequent and staggered price adjustment. This staggering leads to slow adjustment of the price level and to large aggregate output fluctuations in response to movements in aggregate demand. In short, decisions that do not matter much at the individual level (how often to change prices or wages) lead to large aggregate effects (slow adjustment of the price level, and shifts in aggregate demand that have a large effect on output).Diff: 124.5 First Lessons for Macroeconomics after the Crisis1) The crisis reflects a major intellectual failure of macroeconomics to understand the macroeconomic importance ofA) financial system.B) growth.C) unemployment.D) inflation.Answer: ADiff: 12) Work by Doug Diamond and Philip Dybvig in the 1980s had clarified the nature ofA) unemployment.B) bank runs.C) inflation.D) growth.Answer: BDiff: 13) Economist ________ shows the "limits of arbitrage."A) Doug DiamondB) Andrei ShleiferC) Philip DybvigD) Richard ThalerAnswer: BDiff: 14) The Great Depression had led economists to suggest a larger role forA) market mechanism.B) government intervention.C) price mechanism.D) international trade.Answer: BDiff: 15) Recent research up to the crisis proceeded mainly on three fronts. Discuss each of them. Answer: New classical: the extent to which fluctuations in output are explained by movements in the natural level of output. New Keynesian: exploring the nature of market imperfections and nominal rigidities and the extent to which they can explain fluctuations in output. New Growth theory: examines the determinants of technological progress and the implications of increasing returns to scale for economic growth.Diff: 16) Discuss the major intellectual failure on macroeconomics from the crisis.Answer: The failure was in not realizing that such a large crisis could happen,that the characteristics of the economy were such that a relatively small shock, in this case the decrease in U.S. housing prices, could lead to a major financial and macroeconomic global crisis. The source of the failure, in turn, was a lack of focus on the role of the financial institutions in the economy.Diff: 17) Discuss research on the role of banks and other financial institutions in the intermediation of funds between lenders and borrowers.Answer: Work by Doug Diamond and Philip Dybvig in the 1980s had clarified the nature of bank runs : liquid assets and liquid liabilities created a risk of runs even for solvent banks. The problem could only be avoided by the provision of liquidity by the central bank if and when needed. Work by Bengt Holmström and Jean Tirole had shown that liquidity issues were endemic to a modern economy. Andrei Shleifer discussed the limits of arbitrage. Behavioral economists had pointed to the way in which individuals differ from the rational individual model typically used in economics, and had drawn implications for financial markets.Diff: 18) Discuss the consensus on the adjustment process after the crisis.Answer: The crisis has raised a larger issue, about the adjustment process through which output returns to its natural level. If there is a consensus, it might be that with respect to small shocks and normal fluctuations, the adjustment process works, and policy can accelerate this return; but that, in response to large, exceptional shocks, the normal adjustment process may fail, the room for policy may be limited, and it may take a long time for the economy to repair itself.Diff: 1。

CHAPTER 19PRICES AND OUTPUT IN AN OPEN ECONOMY:AGGREGATE DEMAND AND AGGREGATE SUPPLY OUTLINE19.1 Introduction19.2 Aggregate Demand, Aggregate Supply, and Equilibrium in a Closed Economy19.2a Aggregate Demand in a Closed Economy19.2b Aggregate Supply in the Long Run and in the Short Run19.2c Short-Run and Long-Run Equilibrium in a Closed EconomyCase Study 19-1: Deviations of Short-Run Outputs from the Natural Level in the U.S.19.3 Aggregate Demand in an Open Economy Under Fixed and Flexible Exchange Rates19.3a Aggregate Demand in an Open Economy Under Fixed Exchange Rates19.3b Aggregate demand in an Open Economy Under Flexible Exchange Rates19.4 Effect of Economic Shocks and Macroeconomic Policies on Aggregate Demandin Open Economies with Flexible Prices19.4a Real-Sector Shocks and Aggregate Demand19.4b Monetary Shocks and Aggregate Demand19.4c Fiscal and Monetary Policies and Aggregate Demand in Open Economies19.5 Effect of Fiscal and Monetary Policies in Open Economies with Flexible PricesCase Study 19.2: Central Bank Independence and Inflation in Industrial Countries19.6 Macroeconomic Policies to Stimulate Growth and to Adjust to Supply Shocks19.6a Economic Policies for Growth19.6b Economic Policies to Adjust to Supply ShocksCase Study 19.3: Petroleum Shocks and Stagflation in the United StatesCase Study 19.4: Actual and Natural Unemployment Rate, and Inflation in United StatesCase Study 19.5: Actual and Natural Unemployment Rate, and Inflation in United StatesCase Study 19.6: Has the U.S. Economy Become Recession Proof? Key TermsAggregate demand curve (AD)Aggregate supply curve (AS)Long-run aggregate supply curve (LRAS)Natural level of output (YN)Short-run aggregate supply curve (SRAS)Expected pricesStagflationLecture Guide1. This is not a core chapter and I would omit it in a one-semester undergraduate course in international economics.2. If I were to cover this chapter, I would cover two sections in each of three lectures and assign the end-of-chapter problems.Answer to Problems1. See Figure 1.2. See Figure 2.3. See Figure 3.4. See Figure 4.5. An unexpected increase in prices in the face of sticky wages means that real wages temporarily fall. This leads firms to hire more workers and thus increase output in the short run. In the long-run, however, money wages fully adjust to (i.e., increase in the same proportion as) the increasein prices. As a result, real wages return to their previous higher level, firms reduce employment to their original lower level, and the nation's output returns to its lower long-runnatural level, but at the new higher price level.6. Starting from point C in Figure 19-3, an unexpected decrease in aggregate demand from AD' to AD causes prices to fall and firms to temporarily reduce their output, giving the new short-run equilibrium point where the AD' curve intersects the SRAS' curve. In the long run, however, as expected prices fall to match actual prices, the short-run aggregate supply curve shifts down by the amount of the price reduction (i.e., from SRAS' to SRAS) and defines new long- run equilibrium point E at the natural level of output YN, but lower price level of PE.Another way of saying this is that at point to the left of the LRAS curve, actual prices are lower than expected prices. Expected prices then fall and this shifts the SRAS curve downward until expected prices are equal to the lower actual prices, and the economy returns to its long-run natural level of output equilibrium.7. An unexpected decrease in aggregate demand causes prices to fall. If wages are sticky and do not immediately fall in the same proportion as the fall in prices, real wages will temporarily increase. This leads firms to hire fewer workers and thus reduce output in the short run. In the long-run, however, money wages fully adjust to (i.e., fall in the same proportion as) the fall in prices. As a result, real wages return to their previous lower level, firms increase employment to their original higher level, and the nation's output returns to its higher long-run or naturallevel, but at the new higher lower level.8. If the LM' curve intersected the IS' curve at a point below the BP' curve in the left panel of Figure 19-5, the interest rate in the nation would be lower than required for balance of payments equilibrium. The nation would then have a deficit in its balance of payments. Under a fixed exchange rate system, the deficit in the nation's balance of payments would result in an outflow of international reserves and thus a reduction in the nation's money supply, which would shift up the LM' curve sufficiently to intersect the IS' curve on the BP' curve, so that the nationwould be simultaneously in equilibrium in the goods and money markets and in the balance of payments, as at point E".9. See Figure 5.10. Starting from equilibrium in the goods and services sector, in the monetary sector, and in the balance of payments, an autonomous worsening of the nation's trade balance at unchanged domestic prices, causes the IS and BP curves to shift to the left and opens a deficit in the nation's balance of payments under fixed exchange rates. This leads to a leftward shift of the LM curve and a reduction in national income. Thus, the nation's aggregate demand curve shifts to the left.11. With flexible exchange rates, the autonomous worsening of the nation's trade balance at unchanged domestic prices, causes the IS and BP curves to shift to the left (just as in the case of fixed rates). Now, however, the tendency of the nation's balance of payments to go into deficit leads to a depreciation of the nation's currency and a deterioration in the nation's trade balance, so that the BP and IS curves shift to the left, back to their original position along the unchanged LM curve. Thus, the nation returns to the original equilibrium position and point on its original aggregate demand curve.12. Expansionary fiscal policy under fixed exchange rates or easy monetary policy under flexible rates can correct a recession but only the expense of higher prices or inflation. If prices are flexible downward in the nation, however, the recession can be corrected automatically and in a relatively short time by falling domestic prices, which would stimulate the domestic and foreign demand for the nation's goods and services. If domestic prices are sticky or not too flexible downward, however, relying on market force (i.e., falling prices in the nation) to automatically correct the recession may take too long, and this may justify the use of expansionary fiscal or monetary policies.13. The nation would reach the long-run equilibrium point where the AD' curve crosses the unchanged LRAS curve. The SRAS curve would also shift and cross the LRAS curve at the same point. The nation's natural level of output and employment would then be the same as before the supply (petroleum) shock, but prices would be higher.14. The concept of the natural rate of unemployment is useful as long as no structural changes take place in the economy. When structural changes do occur (and globalization may just be such a structural change), then the rate of natural unemployment will change. With globalization the natural rate of unemployment may well be 5 percent or lower in the United States today.Multiple-Choice Questions1. In general, as the economy expends or contracts over the business cycle *a. prices changeb. prices remain unchanged except in a recessionc. prices remain unchanged until the economy reaches full employmentd. all of the above2. The aggregate demand curve (AD) for closed economy is derived from thea. IS curveb. LM curvec. FE curve*d. IS and LM curves3. A reduction in the general price level with a constant money supply is shown by aa. leftward shift in the LM curve*b. movement down along a given aggregate demand curvec. rightward shift in the aggregate supply curved. a rightward shift in the IS curve4. An increase in the money supply with constant prices leads to aa. leftward shift in the LM curveb. movement along a given aggregate demand curve*c. rightward shift in the aggregate demand curved. rightward shift in the IS curve5. An increase in government expenditures leads toa. a rightward shift in the IS curveb. a rightward shift in the AD curvec. an increase in the level of national income*d. all of the above6. A nation's output in the short-run cana. exceed its natural levelb. fall short of its natural levelc. equal to its natural level*d. any of the above7. Which of the following statements is false?a. a nations' natural level of output can increase as a result of growthb. imperfection in product markets can lead to temporary deviations in a nation's output from its long-run natural level*c. sticky wages cannot lead to temporary deviations in a nation's outputfrom its long-run natural leveld. none of the above.8. Output in the short run exceeds the natural level of output if expected prices*a. exceed actual pricesb. are lower than actual pricesc. are equal to actual pricesd. any of the above9. The aggregate demand curve (AD) for an open economy is derived from thea. IS curveb. LM curvec. BP curve*d. all of the above10. The aggregate demand curve for an open economy under fixed exchange rates isa. less elastic than if the economy were closed*b. more elastic than in the economy were closedc. more elastic than in the economy operated with flexible exchange ratesd. all of the above11. An autonomous improvement in the nation's trade balance under fixed exchange rates will cause the nation's aggregate demand curve to*a. shift to the rightb. shift to the leftc. remain unchangedd. any of the above12. An autonomous short-term capital outflow under flexible exchange rates causes the nation's aggregate demand curve to*a. shift to the rightb. shift to the leftc. remain unchangedd. any of the above13. With high short-term international capital flows, fixed exchange rates, and flexible pricesa. monetary policy is effective*b. fiscal policy is effectivec. both fiscal and monetary policies are effectived. neither fiscal policy nor monetary policies are effective14. Which of the following statements is false?a. expansionary fiscal or monetary policy can increase the nation's outputtemporarily above its natural levelb. expansionary fiscal or monetary policy can used to correct a recession but only at the expense of higher prices in the nation*c. a recession cannot be eliminated automatically even if domestic prices are flexible downwardd. when prices are not flexible downward inflation may be less costly that recession15. Which of the following statements is false with regard to the effect of macroeconomic policies?a. they generally cause shifts in the aggregate demand curveb. they can possibly increase long-run growthc. they can help correct supply shocks that increases production costs but only at the expense of even higher inflation*d. they always cause shifts in the long-run aggregate supply curve。

CHAPTER 19BIG EVENTS: THE ECONOMICS OF DEPRESSION,HYPERINFLATION, AND DEFICITSChapter Outline•The Great Depression and its impact on macroeconomics•Money and inflation•Monetarism and the rational expectations approach•The effects of hyperinflation•Disinflation and the sacrifice ratio•Credibility•The Fed's dilemma•Deficits, money growth, and seigniorage•The inflation tax•Federal government outlays and revenues•The primary deficit•The debt-to-income ratio•The burden of the debt•Financing Social SecurityChanges from the Previous EditionThe material in this chapter was in Chapter 18 in the previous edition. It has been updated, Boxes 19-2 and 19-5 have been added, and other boxes have been renumbered accordingly. Introduction to the MaterialThe Great Depression in the 1930s presented an economic crisis of enormous proportions. Between 1929 and 1933, real GDP in the U.S. fell by almost 30% and unemployment reached an all-time high of almost 25%. While the economy grew fairly rapidly from 1933-37, unemployment remained in the double digit range. In 1937/38, there was another major recession and the unemployment rate remained above 5% until 1942. In the 1930s unemployment averaged 18.8%, but by 1939 real GDP had recovered to its 1929 level.The classical economists of the time were not equipped to explain the existence of such substantial and persistent unemployment or to prescribe policies to deal with it. Only in 1936, in John Maynard Keynes’book The General Theory of Employment, Interest and Money, was a macroeconomic theory introduced upon which policies to keep the economy out of future recessions could be based. Keynes’ theory provided an explanation of what had happened during the Great Depression and suggested policies that might have prevented it.The stock market crash of 1929 is often seen as the catalyst for the Great Depression but, in fact, economic activity actually started to decline even before the crash. What might well have393been an average recession turned into a very severe depression due to the inept economic policies employed at the time. The Fed failed to provide needed liquidity to banks and did little to prevent the collapse of the financial system. The huge contraction in money supply due to the large numbers of bank failures caused the economic downturn. Fiscal policy was weak at best. Politicians concerned with balancing the budget raised taxes to match increases in government spending, so the decline in aggregate demand was not counteracted.Many other countries also suffered during the same period, mainly as a result of the collapse of the international financial system and the enactment of high tariffs worldwide. These policies were designed to protect domestic producers in an attempt to improve each country’s domestic trade balance at the expense of foreign trading partners. However, the attempts to "export" unemployment ultimately resulted in an overall decline in world trade and production.In the U.S., many institutional changes and administrative actions, collectively known as the New Deal, were implemented in the 1930s. The Fed was reorganized and new institutions were created, including the FDIC, the SEC, and the Social Security Administration. Public works programs and a program to establish orderly competition among firms were also implemented.The experience of the Great Depression led to the belief that the economy is inherently unstable and active stabilization policy is needed to maintain full employment. Keynes was an advocate of active government policy. In his work, he explained what had happened in the Great Depression and what could be done to avoid a recurrence. Many years later, Milton Friedman and Anna Schwartz offered a different explanation. In their book A Monetary History of the United States, Friedman and Schwartz argued that the severe decline in money supply, caused by the Fed’s failure to prevent banks from failing, was the reason for the severity of the Great Depression. They claimed that monetary policy is very powerful and that fluctuations in money supply can explain most of the fluctuations in GDP over the last century. This argument provided the impetus for new research on the effects of fiscal and monetary stabilization policies. While economists are still debating these issues, we can conclude that monetary policy can affect the behavior of output in the short and medium run, but not in the long run. In the long run, increases in the growth rate of money supply will simply lead to increases in the rate of inflation. Box 19-3 gives an overview of the monetarist positions on the importance of money for the economy, while Box 19-2 quotes Fed Chairman Ben Bernanke, who admits that the magnitude of the Great Depression was indeed the result of the Fed’s action—or, more accurately, inaction.The link between inflation and monetary growth can easily be derived from the quantity theory of money equation:MV = PY ==> %∆M + %∆V = %∆P + %∆Y ==> m + v = π + y ==> π = m - y + v In other words, the rate of inflation (%∆P = π) is determined by the difference between the growth rate of nominal money supply (%∆M = m) and the growth rate of real output (%∆Y = y), adjusted for the percentage change in the income velocity of money (%∆V = v).Figure 19-1 shows that trends in the rate of inflation and the growth of money supply (M2) have been somewhat similar over the last four decades. There is plenty of evidence to support the notion that in the long run, inflation is a monetary phenomenon here in the U.S. as well as in other countries. However, there are short-run variations, indicating that changes in velocity and output growth have also affected the inflation rate. By the mid 1990s, the relationship between394M2 growth and inflation had largely broken down, even for the long run. It is still true, however, that there has never been inflation in the long run without rapid growth of money supply, and the faster money grew the higher the rate of inflation.Although there is no exact definition, countries are said to experience hyperinflation when the inflation rate reaches 1,000% annually. Countries that have experienced hyperinflation have all had huge budget deficits which, in many cases, originated from increased government spending during wartime. A classical example is the German hyperinflation of 1922/23. In an economy experiencing hyperinflation, there is often widespread indexing, most likely to foreign exchange rates rather than to the price level, since prices are changing so fast. Eventually, hyperinflation becomes too much to bear and the government is forced to take harsh measures, including fiscal reform and the introduction of a new monetary unit pegging the new money to a foreign currency. Box 19-4 on the situation in Bolivia in the 1980s provides a good example of how hyperinflation can be stopped. It also points out that the costs are great in terms of decreasing per-capita income. In 1985, Bolivia stopped external debt service, raised taxes, reduced money creation, and stabilized the exchange rate. Inflation came down quickly, but per-capita income in 1989 was 35 percent less than it had been a decade earlier.In its fight against hyperinflation, Israel tried to keep unemployment rates low by instituting wage and price controls while also sharply cutting budget deficits and rationing credit. These measures reduced the rate of inflation significantly. In the late 1980s, the governments of Argentina and Brazil imposed wage-price controls but failed to supplement them with fiscal austerity, so the result was much less satisfactory, although they, like many South American countries eventually succeeded in lowering their inflation rates. In the early 1990s, countries in Eastern Europe experienced brief periods of high inflation during their adjustments from centrally planned economies to more market based economies (as shown in Table 19-6). There is no guarantee that periods of hyperinflation will not surface again. New Box 19-5 describes the situation in Zimbabwe where the decision made in 2006 to print more money to finance higher government spending led to inflation rates in excess of 1,000%.When inflation is high, policy makers must focus on reducing it without causing a major economic downturn. This is fairly difficult to accomplish, however, since labor contracts tend to reflect past expectations and new contract negotiations take time. In addition, it may be difficult for a central bank to gain credibility in its fight against inflation because of its behavior in the past. Credibility is important, since inflationary expectations adjust down faster if people believe that a government is serious in its attempt to reduce inflation. If this is the case, the expectations-adjusted Phillips curve shifts to the left sooner and the economy adjusts more quickly to the full-employment level of output at a lower inflation rate. But some increase in unemployment is almost always needed to reduce inflation, since real wages need to adjust down to their full-employment level. The costs to society are often measured in terms of the sacrifice ratio, that is, the ratio of the cumulative percentage loss of GDP to the achieved reduction in the inflation rate.Probably all economists now agree with the monetarist propositions that rapid money growth tends to be inflationary and inflation cannot be kept low unless money growth is kept low. We also know that monetary policy has long and variable lags. But other monetarist positions remain more controversial, including those that suggest that the economy is inherently stable and that monetary targets are better than interest rate targets. The rational expectations approach can be seen as an extension of the monetarist approach, with a strong belief that markets clear rapidly395and people use all information available to them. This is why they advocate policy rules rather than discretion and place emphasis on the credibility of policy makers. Box 19-6 highlights the rational expectations approach.Any government that is unwilling to show fiscal restraint will ultimately be faced with excessive money growth and an increase in the inflation rate. Continued large government budget deficits create a policy dilemma for a central bank, which must decide whether to monetize the debt. If the central bank decides not to finance the debt, the increased borrowing needs of the government may drive interest rates up, leading to the crowding out of private spending. The central bank may then be blamed for slowing down economic growth. But if the central bank is worried about high interest rates and monetizes the debt in order to keep interest rates low, inflation may increase with the central bank taking the blame.The financing of government spending through the creation of high-powered money is an alternative to explicit taxation. Inflation acts like a tax since the government can spend more by printing money while people can spend less, since some of their income must be used to increase their nominal money holdings. The inflation tax revenue is defined as:inflation tax revenue = (inflation rate)*(the real money base).The ability of the government to raise additional tax revenue through the creation of money (and therefore inflation) is called seigniorage, and Table 19-7 shows some empirical evidence of the inflation tax revenue raised as percentage of GDP for some Latin American countries. However, there is a limit to how much revenue a government can raise through an inflation tax. As inflation increases, people reduce their currency holdings and banks reduce their excess reserves, since holding money becomes more costly. Eventually the real monetary base falls so much that the government's inflation tax revenue decreases. Figure 19-3 shows this graphically.While higher deficits can cause higher inflation if they are financed through money creation, higher inflation may also contribute to deficits, since inflation reduces the real value of tax payments. In addition, high nominal interest rates (caused by high inflation) raise the nominal interest payments the government must make on the national debt. The inflation-adjusted deficit corrects for that and is defined in the following way:inflation-adjusted deficit = total deficit - (inflation rate)*(national debt).Large government budget deficits and rapid monetary expansion seem to be inevitable parts of hyperinflation. The high rate of monetary expansion originates in the government's desire to raise its inflation tax revenue. However, the government can only be successful if it prints money faster than the public anticipates. Eventually, the process will break down, as the real money base becomes smaller and smaller.During the 1980s, the U.S. experienced very large budget deficits, which were temporarily brought under control in the late 1990s, only to increase sharply again in 2002. Figure 19-4 shows the trend in U.S. budget deficits as percentage of GDP, while Tables 19-8 and 19-9 give an overview of trends in the U.S. government's outlays and revenues. It is interesting to note that entitlements and interest payments on the national debt have increased significantly over the last396four decades. On the revenue side, corporate income taxes as a share of GDP have declined, while social insurance taxes have increased substantially.To highlight the role of the national debt in the budget, it is useful to distinguish between the actual budget deficit and the primary (non-interest) budget deficit. The U.S. budget deficits in the 1990s were actually more a result of high interest payments on the previously incurred debt than of government spending exceeding tax revenues. This is the legacy of past deficits. As the national debt accumulates, its interest costs accelerate, contributing even more to the budget deficit. The national debt is the result of all past and present budget deficits, and the process by which the Treasury finances the debt is called debt management. As old government securities mature, the Treasury issues new securities to make the payments on old ones.Robert Eisner has argued that it is important to recognize that the government has assets and not just debts. Any spending on infrastructure should be treated as accumulation of real capital and offset by the debt issued to pay for it. In other words, just like private spending, government expenditures should be separated into government “consumption” and government “investment.”With the U.S. gross national debt now exceeding $8.5 trillion (or over $28,000 per capita), it becomes important to consider its real burden. If individuals who hold government bonds consider an increase in government debt as an increase in their personal wealth, they will consume more and a lower share of GDP will be invested. This will lead to a lower rate of capital accumulation and slower future economic growth. Another concern is that foreigners hold a large part of the debt. Since the burden of future tax payments on this part of the debt (plus interest) will fall on U.S. taxpayers while the recipients of these payments will be foreigners, there will be a reduction in U.S. net wealth.High deficits cannot be sustained indefinitely, but as long as national income is growing faster than the national debt (implying a declining debt-income ratio), the potential for instability is fairly low. In the 1990s, there was widespread sentiment that government had grown too big and that sound fiscal policy had to be implemented. The fiscal restriction finally succeeded in turning the large budget deficits of the 1980s into budget surpluses in 1998. A debate quickly began among politicians about the best ways to put the surplus to use. Was it better to cut taxes, increase spending, or gradually pay off the national debt? The path chosen by the Bush administration was a massive tax cut, leading to renewed budget deficits in 2002.Another debate revolves around Social Security reform. There is increasing concern about the financial difficulties that the Social Security system will face in the near future. The system is financed to a large extent on a pay-as-you-go basis, with most of the earmarked taxes paid by current workers being used immediately to finance the Social Security benefits of current retirees. Such a transfer of resources from the young to the old can be accomplished if:• A growing population increases the ratio of workers to retirees. If population growth slows, however, then contributions have to be increased or benefits have to be cut.•High-income growth allows retirement benefits to be higher than past contributions, since the source of the benefits is the higher income of the younger generations. If income growth slows, however, then the system may face financing difficulties.•The political situation is favorable. A larger percentage of older people than younger people vote so the elderly can enforce the intergenerational transfer through the political system. But at some point, the young, who expect to receive lower benefits than their parents relative to their contributions, may refuse to support the system through their taxes.397While the Social Security system is often seen as a “forced savings system,” which makes sure that everyone accumulates some wealth for retirement, there is strong empirical evidence that the system actually reduces national saving due to its pay-as-you-go financing. The decline in saving reduces the rate of capital accumulation, which lowers productivity and future living standards.The Social Security trust fund actually has been growing as a result of the Social Security Reform of 1983, but current predictions are that the system will be bankrupt after 2045 when most of the baby-boomer generation will have retired. While most people do not wish to see the Social Security system totally abandoned, additional reforms are very likely in the near future. The central question is how to earn higher returns on the funds invested to prevent the system from insolvency and how to preserve equity for those who have already paid into the system. Suggestions for LecturingStudents who follow the news see stock prices fluctuate daily and they probably heard about past stock market bubbles and crashes. These students will be curious about the impact of major swings in stock market activity on the economy. Most people assume that the stock market crash of October, 1929 marked the beginning of the Great Depression and are not aware that economic activity had actually begun to decline earlier. A good way to introduce the material in this chapter is to ask: “Could a Great Depression happen again?” or “Do stock market crashes cause economic downturns?” Either will lead to a lively class discussion that can help to highlight several of the issues raised in the chapter. In this discussion the major stock market crash of October, 1987 and the decline in (especially high-tech) stock values that started in March, 2000 will undoubtedly come up. They are reminders that stock market bubbles will always eventually burst and that there is considerable risk associated with buying stocks.Most economists now agree that the magnitude of the Great Depression was exacerbated by inadequate fiscal and monetary policy responses. The Fed’s failure to inject e nough liquidity into the banking system to prevent failures led to a severe contraction in the supply of money and an economic downturn, and. Policy makers also did little initially to stimulate economic activity through fiscal policy. The severity of the economic situation in the 1930’s is not surprising to economists today, as no well-developed economic theory existed at the time that could deal with a disturbance of this magnitude. It was not until John Maynard Keynes offered an explanation of what had happened during the Great Depression and suggested ways to prevent future recessions that macroeconomists began to ponder the values of fiscal and monetary stabilization policies. It is no wonder that Keynes is seen by many as the “father of all macroeconomists.”Economic theories are generally pro ducts of their time and, as mentioned above, Keynes’macroeconomic theory was developed as a result of the Great Depression. His explanation and prescription for preventing future depressions were widely accepted, but did not have much impact on policy making in the U.S. until the 1960s, when the government followed (mostly fiscal) activist policies to ensure full employment.The handling of the major stock market crash of 1987 appears to indicate that policy makers have learned from past mistakes. Stock values dropped by more than 24% in October of 1987, but we did we not see a severe downturn in economic activity. Why not? For one, Alan398Greenspan, who had been appointed as chair of the Board of Governors of the Fed only a few months earlier, was conscious of what had happened in 1929 and immediately assured financial markets that the Fed would provide the liquidity needed to prevent a financial collapse. The Fed quickly started to undertake open market purchases in an effort to drive interest rates down. In addition, as a result of institutional changes implemented after the Great Depression, government now has a much larger role in the economy. Students should be aware that the Great Depression not only shaped modern macroeconomic thinking and approaches to stabilization policy, but also shaped the structure of many U.S. institutions. Instructors may want to spend some time talking about these institutions and their importance to our economy.It also should be noted that the economy was in much better shape when the stock market crashed in 1987 than it was in 1929. While we can only speculate on what would have happened had the economy been in worse shape, the existence of programs such as Social Security and unemployment insurance would have dampened the severity of a downturn by providing some automatic stability. In addition, the existence of the FDIC, which insures all bank deposits up to $100,000, now serves to avoid panic in financial markets and runs on banks.The recession in 1981/82, which was the most severe recession since the Great Depression and brought the unemployment level close to 11%, provides another good example that policy makers now react much more swiftly to major economic upheavals. Even though the recession was fairly severe, it did not last for an extended period, since expansionary policies were implemented almost immediately after the magnitude of the downturn became clear.There are still disagreements about the primary causes for the Great Depression and these should be clarified. The Keynesian explanation concentrates on spending behavior, that is, the reduction in consumption and the collapse of investment. The decrease in aggregate demand was exacerbated by the restrictive fiscal policy implemented by the government trying to balance the budget. The monetarist explanation concentrates on the behavior of money and asserts that the Fed failed to prevent the collapse of the banking system. The large number of bank failures led to a loss of confidence in the banking system, an enormous increase in the currency-deposit ratio, and therefore a huge decrease in the money multiplier. Monetarists see the resulting severe decline in money supply as the cause of the Great Depression. Both explanations fit the facts and it is important for instructors to point out that there is no inherent conflict between them; in fact, they complement one another.While the programs of the New Deal are largely credited with revitalizing the economy in the mid-1930s, probably one of the most important factors was the sharp increase in money supply, starting in 1933. This is often a forgotten fact. It should be noted that while unemployment remained high, the deflation of prices and wages stopped after 1933, and output began to rebound. In addition, some of the programs implemented by the government after the Great Depression helped to keep wages from falling further.The fact that unemployment’s downward pressure on wages tends to weaken if high unemployment is persistent should also be mentioned at this point. The possibility that the behavior of nominal wages affects the rate of inflation should be discussed with reference to the situation in some European countries, where the unemployment rate has been above the levels experienced in the U.S. for quite some time.The German hyperinflation of 1922-23, when the inflation rate averaged 322% per month, provides another example of a major economic event that shaped macroeconomic thinking. But399students will probably prefer to discuss more recent examples, such as the Bolivian experience of the 1980s highlighted in Box 19-4 or the situation in Zimbabwe starting in 2006. Both cases make clear that the cost of stopping hyperinflation can be extremely high in terms of a decreased standard of living. The discussion should make it clear that large budget deficits and rapid monetary growth are always prevalent in times of hyperinflation, and only draconian measures can ensure a reduction in inflationary expectations. Without such measures the economy will collapse and has to be completely restructured, with the introduction of a new monetary unit that may be pegged to a foreign exchange rate.There is no exact definition of hyperinflation, but it is said to exist when the inflation rate reaches 1,000% on an annual basis. Students will always remember the following definition of inflation in general: “inflation is nothing more than too much money chasing too few goods.” But is inflation “always and everywhere a monetary phenomenon,” as Milton Friedman put it? Figure 19-1 indicates that the rate of inflation and the growth rate of M2 show somewhat similar long-run trends (at least until about 1993), but there are large variations in the short run. In other words, the link between monetary growth and the inflation rate is by no means precise. For one, growth in output affects the inflation rate and real money holdings. Interest rate changes and financial innovations also affect desired money holdings and therefore the income velocity of money. Empirical evidence indicates that the velocity of M2 has shown a fairly constant long-run trend from the 1960s to the 1990s, while the velocity of M1 has fluctuated significantly over the last few decades. Considering the enormous changes that took place in the U.S. banking system in the 1980s, it is surprising that the income velocity of M2 actually stayed as stable as it did. By the late 1990s, the link between M2 growth and the inflation rate had largely broken down; the possible causes and any monetary policy implications should be discussed.By now, students should be familiar with the quantity theory of money equation and should be able to derive the equation that shows the long-run relationship between money growth, output growth, velocity changes, and the rate of inflation. We can thus derive the following:MV = PY ==> %∆M + %∆V = %∆P + %∆Y ==> %∆P = %∆M - %∆Y + %∆V==> π = m - y + v.This equation indicates that higher growth rates of money (%∆M = m) adjusted for growth in output (%∆Y = y) and changes in velocity (%∆V = v) are associated with higher inflation rates (%∆P = π). The strict monetary growth rule is based on this equation and suggests that a zero inflation rate can be achieved if money supply is only allowed to grow at the same rate as the long-run trend of output, assuming that velocity remains stable. It should be made clear, that this equation shows only a long-run relationship and that output growth and velocity can be highly variable in the short run, causing great variations in the inflation rate.Besides looking at the role of monetary growth in determining the inflation rate, instructors may also want to spend some time looking at the role of nominal wages and labor productivity. Just by recalling the simple equationw = W/P,400。

（15）《经济学人》中英对照TEXT 1 Rebuilding the American dream chine 重建美国梦机器 Jan 19th xx | NEW YORK From The Economist print edition FOR America's colleges, January is a month of reckoning. Most applications for the next academic year beginning in the autumn have to be de by the end of De mber, so a university's popularity is put to an objective standard: how ny people want to attend. One of the more unlikely offi s to have been flooded with il is that of the City University of New York (CUNY), a public college that lacks, among other things, a famous sports team, bucolic campuses and raucous parties (it doesn't even have dorms), and, until re ntly, academic credibility. 对美国的大学而言，一月是一个清算的月份。

大多数要进入将于秋季开学的下一学年学习的申请必须在12月底前完成，因此一所大学的声望就有了客观依据：申请人的多少。

纽约城市大学，一所公立学院，与其他学校相比，它没有一支声名显赫的运动队，没有田园诗一般的校园，也没有喧嚣嘈杂的派对——甚至连宿舍都没有，而且，直到最近也没取得学术上的可信度，可就是这所大学的办公室塞满了学生们寄来的申请函，这简直有些令人难以置信。