Lecture Video Quizzes Exam 2

As firms accumulate capital goods in our model this results in

an increase in the demand for labor, as capital adds to worker productivity

If economic growth is driven by AD shocks (increases in Gov spending or C) then

we expect to see agg prices increasing

According to the article, technological progress in agriculture had a short run negative effect on employment

but a long run positive effect as cheap food freed up income to buy other types of goods and workers were needed there

An expectation that the economy is going to do badly can cause the stock market to ____ and investment spending to ___

fall; fall

Converge happens if rich and poor countries have the same per capita GDP growth rates

false

In the data, consumption tends to be more volatile than GDP

false

In the last few years, poor countries have started to catch up more quickly to US levels

false

if prices fall while GDP falls, we know it is a keynesian recession, because negative AS shocks make prices rise

false

lower population growth implies that both GDP and per capita GDP are higher

false

technological progress is

hard to predict and tends to follow long waves with clumping of innovations for some periods and then a long period of tepid progress

according to economic theory, countries with lower per capita GDP are likely to

have capital account surpluses, w money flowing in, which causes them to grow faster

fewer babies means

labor supply is further to the left, real wages are higher, and per capita GDP is higher

Both in the LR and recently, we've observed that per-capita GDP and life expectancy have both been

rising all over world

according to the keynesian model, shifts in AD are bigger if the mpc is

bigger

oil "shocks" that unexpectedly drive up price of oil are considered

technology shocks

Economic growth likely causes negative externalities in terms of pollution, which then affects productivity (heat affects agricultural production but also the ability to use machinery for both manufacturing and computing), feeding back to lower GDP growth

true

Free trade and capital may cause economic growth for all but may at the same time widen the gap between rich and poor

true

in classical explanation of recession lower employment is the result of workers voluntarily leaving the labor force

true

in keynesian boom we are above pot GDP but in classical boom we are at pot GDP

true

scientific questions are those that test falsifiable hypotheses

true

The US approach to fiscal stimulus during the early months of the pandemic has more of an emphasis on _______ than in other countries

unemployment and income support

If this open view toward immigration prevails, what impact do we expect on real wages and employment?

According to the classical model, w/p will fall, Labor force participation rates for all workers (including immigrants) will fall, L goes up

Per capita GDP growth in China is forecast to be just over 6% this year. Using the rule of 70

GDP per capita should double in 12 years

Per-capita Research and Development funding in the US has been hard hit by the Great Recession

True, but R&D as a share of GDP is still very highe

Which of the following is NOT a characteristic of the data from class for the period 2014-2019?

Us inflation rates increased steadily over this period

. In our simple model, if labor-replacing technologies reduce the demand for labor, we expect

a temporary increase in structural unemployment, followed by a fall in labor force participation rates and zero unemployment

classical economists argue that AD mistakes would have to be small and could never cause big recession

classical economists think the mpc is small and swings in AD are small

FDR famously instituted a variety of "make work" programs during the Great Depression

if that were a classical downturn, the "make work" program would have reduced employment in the private sector

an increase (to the right) in LRAS curve can also be represented by an ____ in agg prod function

increase (shift up)

If income and substitution effects do not offset in labor markets, then payroll taxes

increase costs for firms and reduce GDP

According to the Keynesian model, a fall in NX results in

leftward shift in AD followed by a movement down and to the right along AD as prices fall and we move to AD=AS

stagflation happens when

negative AS shifts are bigger than negative AD shifts

Long run aggregate supply is vertical because

nominal wages always adjust to match price changes and return the market to w/p =mpl at L*

labor demand is downward sloping function of real wage because

of the joint assumptions of diminishing returns to L and perfect competition in labor markets

In Keynesian model, a fall in AD causes a movement along AS as

prices fall and labor productivity rise; firms cut employment

IN the keynesian model, we have _____ when prices rise and real wages ____

recession with GDP below potential; fall

. An increase in the minimum wage, holding the price level constant, will in this model

reduce labor demand

In the classical model with frictions, labor-replacing technologies will cause

structural unemployment to rise in the short run and for there to be increased unemployment in the long run as frictions increase

The desire to work less when w/p falls is the _______ effect; the desire to work more when w/p falls is the ______effect

substitution; income

when economists refer to "new economy" they mean

the period in the 1990's in which we saw the transformation of production, distribution, and communication using computer technologies

the natural rate of unemployment falls (in theory) if

there are fewer frictions in l mkts (easier for firms to find right kinds of workers)

The economist Thomas Picketty argues that capitalists start out richer, are able to save more and then

they earn even more capitalist income and become even richer, whereas the poor can't afford to save and earn capitalist income

The classical model predicts w/p, employment, and GDP will all move up and down together over the business cycle

this is also what is observed in the data

Changes in the purchasing power of wages are estimated from the data. Changes in the real wage using the CPI will be lower than those using the PCE deflator.

true

The video argues that the less protected US economy will likely do ___ during the recession and ______ during the recovery

worse; better