MACRO ECON (first half)

illegal activities and legal activities in which the participants are avoiding taxes or detection

What types of activities are included in the underground economy?

slow growth and high unemployment

What was President Kennedy's "unofficial" working definition of a "recession" when he argued for his tax cut? (Don't simply say that it was "unofficial" - what did he base his determination on?)

to stimulate the economy by stimulating demand for goods and services. this was a Keynesian policy.

What was the goal of the Kennedy-Johnson Tax Cut of 1964?

to restore the incentives for people to work and invest

What was the goal of the Reagan Tax Cut of 1982?

about 4.3%

What was the growth rate for U.S. real GDP in the First Quarter 2014? (hint: use the graph in the Commentary).

about -2.1%

What was the growth rate for U.S. real GDP in the Second Quarter 2014? (hint: use the graph in the Commentary).

voluntary or not in the work force

Which type of unemployment includes a person who quits work in order to stay home in order to care for a family and household?

cyclical

Which type of unemployment is the only type of unemployment that might be significantly reduced by a government policy of stimulating the economy?

1. The right to use property 2. The right to income from property 3. The right to determine how property will be use

"Ownership" gives the owner different rights. Identify three different rights of "ownership"

value is value is objective rather than subjective

"Planning" can only work well if

higher

As a consequence of European efforts to minimize "churn," most European economies have had "full-employment levels of unemployment" that are ________ than the U.S. full-employment level of unemployment.

positive; there are no value judgments and the issue is (at least conceptually) resolvable with facts

Consider the statement: "The Minimum wage causes unemployment to increase." Is this a positive or normative statement? ______ Why?

financial crises that accompany recessions usually make the recessions worse and last longer

A financial crisis coupled with a recession seems to affect the severity and duration of the recession. How?

unionized workers, workers with higher paying jobs that might otherwise face competition from less skilled workers, and politicians

According to Milton Friedman, who actually gains from the minimum wage?

need

According to socialists, distribution in a communist economy would be based on

will not knowingly do something that will hurt themselves

According to the rationality assumption, economists argue that people

self-interest or greed

Adam Smith argued that people were motivated to engage in economic activity by

no

Was there anything that Resorts could do to eliminate this competition?

criminal schemes such as the Maydoff affair are often used in condemnations of laissez-faire policies, but these cases are very weak. Laissez-faire policies do not advocate or condone criminal behavior, and laissez-faire policies do not deny the need for laws against criminal activity. The real issue at the heart of laissez-faire is whether laws and government policing should be used to restrict self-interest in markets that does not entail criminal activity

Are criminal cases such as the Bernie Maydoff ponzi scheme a strong indictment of laissez-faire policies? Why or why not?

10%

As a bench mark, during a "typical" U.S. recession we should expect the unemployment rate to rise to about

10

As a bench mark, during a "typical" U.S. recession we should expect the unemployment rate to rise to about ____ percent.

42 months

As a benchmark, how long have U.S. expansions averaged during 1854-2009?

16 months

As a benchmark, how long have U.S. recessions averaged during 1854-2009?

about 18 months

As a benchmark, how long have most U.S. recessions lasted?

OPEC has been the world's most successful cartel in history. OPEC has been extraordinarily durable and was responsible for the single largest transfer of wealth from one part of the world to another in history

As cartels go, how significant is OPEC? Why?

double coincidence of wants

Barter severely limits exchanges because in order for barter trades to take place, there must be a

9 years ; it raised the NAIRU

Before the Danish labor market reforms in 1995, how long could Danish workers collect unemployment benefits before being cut off? How did this affect the Danish NAIRU?

This is a fast pace - about three times faster than the long-term U.S. average rate of real growth

China has been growing in real terms at the rate of about 9 percent per year over the last few decades. Suppose that you are asked whether this is fast or slow? Use a benchmark for the U.S. economy found in Chapter 5 to answer this question.

easier and cheaper to come by, but not as accurate in making a good international comparison

Compared to PPP rates of exchange, exchange rates are

much slower

Compared to President Reagan, President Roosevelt and President Obama shared a very different view about the need for government to intervene in a downturn. Their policies reflected this view. However, Roosevelt and Obama also experienced _______ recoveries compared to the recovery from the Reagan Recession.

creative destruction

Competition takes many different forms. "Churn" is a good example of which type of competition?

make it easier to fire - firms already can hire easily, but they are reluctant to hire if they have no way of shedding workers in a difficult economic environment or for misbehaviour

Danish labor market reforms are referenced in the Lecture/Commentary. These reforms attempt to make it easier for firms to hire and fire workers. Which of these two - easier to hire or easier to fire - is the primary or critical dimension of the reforms? Why?

it increases real GDP; there is no net-welfare evaluation of expenditures that preclude these expenditures from GDP

Drunk drivers cause a large share of emergency room admissions and cause great suffering and huge medical expenses. How do the medical costs associated with drunk driving affect U.S. real GDP?

they will continue to decline as the economy enters a recovery, then they will turn higher after a lag (or delay)

During a typical recovery from a recession, how will most interest rates behave?

10.0%

During the Obama recession the unemployment rate rose to a monthly high of ____ percent

10.8%

During the Reagan recession in the early 1980s, the unemployment rate rose to a monthly high of ____ percent.

During a normal recession, unemployment will rise to around 10%; these two recessions were very mild by this metric.

During the last two recessions before the most recent Obama recession, the U.S. unemployment rate rose slightly above 8% in the earlier recession and almost reached 8% in the most recent recession. Everyone who lives through a recession will tell you that it was "recession from hell," but how would you describe there severity? (Hint: Use the benchmark.)

unemployment on an annual basis reached 24.9%. In the worst month of the Great Depression (March 1933) the unemployment rate was 33%.

During the worst year of the Great Depression in the United States,

24.9% (33% is also acceptable, although this was the highest monthly rate)

During the worst year of the Great Depression in the United States, unemployment reached

seasonal

Economic activity, especially retail sales, increases markedly at the end of the year. Is this change secular, seasonal, or cyclical, or random?

property that is an input or factor in the economy's ability to produce goods and services

Economic property is

if transactions are voluntary (not forced) then both buyer and seller will only do a deal if it makes both better off. Unless there are serious third party effects, society will be better off because these two members of society are better off.

Economists usually argue that market transactions (trades) make society better off because

Outsourcing will cost about 336,500 jobs annually, but this is small compared to the 16 million jobs lost annually to churn

How does the expected annual U.S. job loss to foreign outsourcing over the next decade compared to the annual number of U.S. jobs lost through churn in a "typical" year?

the pace of the Reagan recovery was much faster

How does the pace of the recovery in the (current) Obama recession compare to the recovery from the Reagan recession?

it increases real GDP; there is no net-welfare evaluation of expenditures that preclude these expenditures from GDP

Fracking is an oil and gas drilling technique that dramatically increases oil and gas output, but may also generate water pollution. How is this pollution handled in the U.S. measure of real GDP?

economic freedom (to own economic property)

Friedman argued that political freedom was impossible without

the amount of consumer goods that must be given up in order to produce more capital goods

From a Production Possibilities Curve or economic development perspective, the "cost" of more capital goods production for a fully employed economy will be

1. the household sector is not measured 2. the underground economy is not measured 3. there is no net-welfare criteria for being counted in GDP

GDP is not a perfect measure of economic performance or well-being. List two different problems or shortcomings of GDP accounting

very rapid in the 1930s, but slowed dramatically in later decades

Growth in the Soviet Union was

common, but they have always been very divisive, very unstable, and usually slow growing and rarely developing

Historically, slave economies have been

as a shaded bar

How are recessions usually shown in time series graphs?

George H. W. Bush (Sr.) lost the election primarily because he had to run against the unemployment rate during a jobless recovery

How could George H.W. Bush, the U.S. president with the highest public approval ratings in the post-WWII period, loose his re-election bid in 1992? In other words, how did the recession of 1990-91 and the subsequent recovery affect the presidential election held in November of 1992?

These delays make it more difficult to pursue fine tuning policies because they prevent us from knowing what is going on in the business cycle in real time.

How do the NBER delays in announcing critical turning points in the business cycle affect economic policies (for example, fine-tuning policies)?

Deflation is a negative inflation rate, that is, prices (i.e., the price level) fall. Disinflation is a slowdown in the rate of inflation, but prices still increase.

How does disinflation differ from deflation?

the 5.1% decline in real GDP in the Obama recession was greater than the 2.9% decline in the Reagan recession.

How does the Obama recession compare to the decline during the Reagan recession?

the poor, the unskilled, teens, workers entering the work force for the first time, and minorities

In the YouTube video on the minimum wage, who does Milton Friedman think are supposed to benefit from the minimum wage?

there is really no comparison at all between the Great Depression decline and the decline in the Obama recession; the Great Depression decline was 26.7%, while the decline in the Obama recession was 5.1%

How does the severity of the decline in real GDP during the Obama recession compare to the decline during the Great Depression?

jobs recovered to pre-recession levels in 33 months in the Reagan recovery

How does this compare to the job recovery following the Reagan recession in the early 1980s? _____________Jobs recovered to pre-recession levels in 33 months in the Reagan recovery

in 1933 - with unemployment at 24.9% - unemployment was two and a half times the benchmark for U.S. unemployment in a typical recession

How does unemployment in the worst year of the Great Depression (see the table in the text) compare to our benchmark for unemployment in a typical recession?

very slow

How fast has the recovery from the Great Recession been?

bad

How good was the fit of the data for the Phillips Curve for the U.S. economy after the 1960s?

very good

How good was the original "fit" of the data for the Phillips Curve for the U.S. economy in the 1960s?

before the capitalist era, people never expected that things would or could improve; they aspired to a life of little change because change was synonymous with bad change. Since the development of capitalism, people expect that their lives will continually improve. They expect and demand change.

How have attitudes about progress and change changed after the capitalist era began compared to attitudes in pre-capitalist times?

it is not measured or estimated; it is ignored

How is household production treated or handled in the measurement of GDP?

it is not measured or estimated; it is ignored

How is the underground economy treated or handled in the measurement of GDP?

it usually only employs less than 2% of the workforce

How large is the agricultural sector in most developed economies today?

very small (usually less than the statistical discrepancy)

How large or small is the magnitude of the difference between GDP and GNP for most developed economies?

fifteen (15) months

How long after the last recession had ended (that is, passed through the trough) did it take the NBER to announce that the recession was over?

about 10 years

How long did unemployment stay above 10% during the Great Depression (1930-1941)?

about 82 months; longer than the norm or average of about 42 months

How long has the current recovery/expansion lasted? How would you characterize the length of this recovery/expansion?

18 months; this was about two months longer than normal

How long was the last recession in the U.S. economy? (i.e., the Obama recession)? How does this compare to the benchmark for a typical recession?

28 years

How long would it take for an economy that was growing at 2.5 percent per year to double in size? (hint: see the appendix at the end of Chapter 5)

156,000; This is close to the minimum job growth needed to keep the unemployment rate from rising.

How many new jobs did the U.S. economy create in September 2016? How would you interpret this figure?

if people are willing to voluntarily exchange their money for tickets and CDs, then these products must have value to them and they are the best judge of what is good for them. In addition, there is no reason to think that these are exceptions to the Theory of Voluntary Exchange. We are better off for having Justin Bieber (this is correct, but also painful)

If Prof. St. Clair is an advocate of the Theory of Voluntary Exchange (and he is), what must he conclude about Justin Bieber, and why? (Go ahead, tell him what he must say!)

no, a benefit is anything that people value, and many (most?) people value helping others and doing the right thing by others

If people are motivated by self-interest, does this preclude (or prevent) them from doing charitable acts? Why or why not?

57 is the correct number of months since the recovery began in June, 2009. However, there is an error in the Commentary where 51 months is given as the correct answer - I mis-counted. Both answers are significantly longer than the Reagan experience

In the current recovery, how many months did it take for the economy to recover the 8 million jobs lost in the recession?

government ownership

In 1928-29, the Soviet Union decided that "collective ownership" of economic property meant

investment

In a typical recession, which are more volatile, consumption or investment expenditures?

an (almost) balanced plan that was workable, but not anything that was optimal

In actual practice, the goal of "material balancing" was

privately

In capitalism, economic property is owned

contribution

In capitalism, markets tend to reward people and distribute rewards based on

internal passports and restrictions on mobility limited freedom. But the biggest problem was the monopoly that the Soviet government had on economic property - there was only one employer: the Soviet government.

In capitalism, workers are free to be hired or fired. The same is true of Soviet-style socialism, at least in theory. However, worker mobility in the Soviet Union was de facto (that is, in reality) limited by

private individuals and companies

In capitalist economies, economic property is "owned" by

not adjusted for inflation or deflation

In economics, what does nominal mean?

adjusted for inflation or deflation

In economics, what does real mean?

millions lost jobs and millions of jobs were created for a net 180,000 new jobs created

In its Employment Report issued on April 6, 2007, the Bureau of Labor Statistics (BLS) announced that the U.S. economy had created 180,000 "new jobs" in March 2007. Based on your understanding of "churn," identify what happened to jobs created and jobs lost in March 2007. (Be sure that your answer conveys the essence of "churn")

President Reagan basically took a laissez-faire approach to recession policy, arguing that the government should get out of the way and let the economy recover. President Obama has taken an interventionist approach, basically arguing that the economy would never recover without massive government intervention and stimulation.

In many respects, the Obama Recession and the Reagan Recession are very similar. However, the ideology and policies of President Reagan and President Obama are very different. What is the main difference between the two on the role of government in promoting or stimulating a recovery from a recession?

without any significant computer support and with usually only 3 or 4 iterations to get it done

In material balancing, the Soviets were usually able to attempt a balance

money prices

In measuring GDP, What is the common denominator that allows us to add up such very different products and services?

collectively

In socialism, economic property is owned

Japan and USA

In the 20th century, only two countries stood out in terms of robust job creation. The two countries were

removing the restrictions against laying off or firing workers has freed employers to hire workers and Danish job growth has resulted

In the Business Week graph cited in the Lecture/Commentary, Denmark continues to record strong job growth. How is this related to the Danish Reforms?

contribution

In the Soviet Union, socialist distribution was based on

government planners

In the Soviet Union, this meant that decisions about the use of economic property were made by

nothing - there actually are no alternatives in the real word

In the YouTube video on greed, what does Milton Friedman think is the alternative to greed or self-interest in economic decision making?

political clout or political self-interest; No, Friedman does not think that political self-interest is any more noble or better than economic self-interest; in fact, he argues that economic self- interest is better because with economic self-interest, people are deciding what is good for themselves; with political self-interest. Politicians and bureaucrats are deciding what is good for others (the fatal conceit)

In the YouTube video on greed, what does Milton Friedman think motivates political decision making? _________ Does he think that this is better than the greed that motivates economic decision making? Why or why not?

their outcomes or consequences

In the YouTube video on the minimum wage, Milton Friedman argues that you should never evaluate policies on their intentions. What should you evaluate them on?

adhering to tradition

In village economies, economic decisions such as what to produce, how to produce it, and how to distribute it were usually made by

no; you need an index to convert nominal GDP to real GDP (specifically, the Implicit GDP Deflator)

Is real GDP measured using historical prices instead of current prices? What do you need to convert nominal GDP to real GDP?

discouraged workers return to job searching

It is very common to see the unemployment rate actually increase as the economy begins to recover (i.e., after the trough). What causes the unemployment rate to rise at this time?

prohibit or get rid of all seasonal jobs

Seasonal unemployment is measured in the unemployment rate. What would it take in order to get rid of all seasonal unemployment?

job creation (or employment)

Many European countries have enacted laws restricting the ability of firms to reduce their labor force through cut-backs and lay-offs. These policies have been well-intended, but they have had an unanticipated consequence; these restrictions tend to reduce

inflexible, rigid, or not open to churn

Many countries around the world are worried about immigrants taking jobs away from native-born workers. Recent studies have shown that this is a bigger problem in Europe than in the U.S. This recent research suggests that immigrants (both legal and illegal) will only have a net take away effect on employment if labor markets are

the competition of capitals

Mexico's increase in oil output following OPEC's price increases is a good example of which type of competition?

timeliness

Most economists agree that we could dramatically reduce the amount of revision in U.S. GDP accounting. However, there is a trade-off between increased accuracy and

on the interior of the frontier or curve

On which part of the Production Possibilities Curve would you find inefficient production and/or unemployed resources?

Japan

Only one country since World War II has had to struggle with stubborn deflation. Which country has had this dubious distinction?

17 million

Over the past decade, the U.S. economy has created about _____ jobs per year.

16 million

Over the past decade, the U.S. economy has experienced permanent job losses amounting to about ______ jobs per year.

Mr. Reagan

Schumpeter died more than a half century ago, but if he were around today, do you think he would agree with Mr. Obama or Mr. Reagan?

Kennedy cited slow growth and stubbornly high unemployment as his criteria for a recession, but all recoveries are initially jobless and Kennedy may have mistook this for a recession

President Kennedy proposed a tax cut in order to address the recession that he claimed was plaguing the economy during his presidential term. Last week, we looked at Kennedy's definition of "recession." This week, consider whether President Kennedy was confused or misinformed about the high unemployment rate that he claimed was a feature of the on-going recession. Use your understanding of "jobless recoveries" to make the case that Kennedy was confused or misinformed.

about one month

President Kennedy took office on January 20, 1961 and spent much of his administration promoting a tax cut to counter a recession. Go to the table in Chapter 6 that shows the NBER's dating of the U.S. business cycle. How long did the recession last after Kennedy took office?

lived in rural villages and had no hope that their lives or the lives of their children would get any better

Prior to the Industrial Revolution and the spread of capitalism, most people

deflation

Regarding prices, before World War II, recessions in the U.S. economy always produced

disinflation

Regarding prices, recessions since World War II, have usually produced

positive; normative

Smith changed the orientation of economics by elevating ______ analysis over ______ analysis

more complete data

Some people mistakenly think that the revisions in GDP from one estimate to the next are admissions of error in measuring. Actually, the revisions primarily reflect the availability of

they thought that planners, not people, knew what was best for the economy

Soviet planners rejected the criteria that voluntary exchange because

they knew what was good for people and for the economy; people did not know what was good for themselves or the economy

Soviet planners thought that value was "objective." What this essentially meant was that

inflation

Subsequent versions of the Phillips Curve usually depict a relationship between unemployment and

23.3 years

Suppose an economy is growing at 3% per year (real GDP per capita). How long will it take GDP per capita to double in size?

8.75 years

Suppose an economy is growing at 8% per year (real GDP per capita). How long will it take GDP per capita to double in size?

Your co-worker is incorrect because the magnitude of the undercount of discouraged workers is 1% - 2%, not 10.5%

Suppose that the U.S. economy is in a recession and the unemployment rate is at 10.5%. One of your co-workers claims that the government (that is, the BLS) does not accurately measure "discouraged workers" and that the true unemployment rate is easily double the reported rate of 10.5 %. Why is your co-worker either correct or incorrect?

more banks failed during the Reagan recession, an bank failures in the Great Depression were much worse.

Suppose that you have been asked to compare the problem of bank failures during the Obama recession with the past. How do the number of bank failures in the Obama recession compare to the 1930s or the Reagan recession?

the recession would have gotten worse and there would have been no recovery

Suppose the U.S. government had done very little to address the Great Recession (Obama recession). Based on his speeches, what did Mr. Obama think would have happened to the economy?

The Great Depression never really ended on its own - it was interrupted by World War II

The "end" of the Great Depression troubled a lot of people. Why?

Purchasing Power Parity (PPP)

The British publication, The Economist, periodically publishes its "Big Mac Index." While this started out as a half-serious venture, it has developed quite a following. What does the "Big Mac Index" attempt to measure?

Soviet Union

The Great Depression affected virtually all countries around the world except one. Which country managed to escape the Great Depression?

The Soviet Union

The Great Depression affected virtually all countries around the world except one. Which country managed to escape the Great Depression?

all output combinations that are to the right or northeast of the frontier

The Production Possibilities Curve illustrates scarcity. What part of the PPC graph contains unattainable production levels?

the determination by planners that automobile production would consume too many valuable economic resources that could be better used to increase Soviet growth, rather than providing autos to Soviet consumers

The Soviet Union never produced very many automobiles. This was primarily due to

U.S. was predominantly agricultural and agricultural economies have crp cycles, but not business cycles

The U.S. business cycle can be traced back to the mid-1850s. However, the U.S. as a nation can be traced back to the 1780s. Why do we not discuss the U.S. business cycle from 1780 - 1850?

entrepreneurship

The ability to innovate, to perceive opportunities, and to mobilize resources to exploit those opportunities, is called

(real) GDP per capita

The best measure of economic development is

advance; preliminary

The biggest "revisions" from one estimate of GDP to the next estimate usually take place from the _____ estimate to the ______ estimate

26.5%

The decline in real GDP that accompanies a recession is usually measured in low single digits. What was the percent decline in real GDP in the U.S. from 1929 to 1933?

creative destruction is the best answer,_but one can also make the case for the competition of capitals or a combination of both

The development of the North Sea oil fields after 1973-74 is a good example of which type of competition?

92 months

The expansion that ended in 1990 lasted how many months?

advance; preliminary; final no

The first estimate a quarter's GDP that the government (I.e., the BEA) releases is called the ______ estimate. The second estimate is called the _____ estimate, and the third estimate is called the ________ estimate. Are these estimates usually the same?

consumption

The largest component in the Expenditure Approach to measuring GDP is

wages and salaries

The largest component in the Income Approach to measuring GDP is

wage increases

The original Phillips Curve depicted by Almarin Phillips sought to show a relationship between unemployment and

creative destruction

The redesign of many products (e.g., appliances and autos) to make them more energy efficient is a good example of which type of competition?

PPP

The relative size of underdeveloped economies - compared to the U.S. - often depends on how their GDP is converted into dollars. These economies will usually have larger GDPs if we use _____ rates to convert them to dollars.

macao has a long tradition of casino gambling, but it has only been a decade or so since modern Las Vegas-style casinos (most operated by Las Vegas casinos) opened. These new casinos seem to have syphoned away a considerable number of gamblers - especially high rollers or "whales" - who would otherwise gamble in Las Vegas. This competition suggests that Macao is in the same market (especially at the high end of the market) as Las Vegas. There is little evidence that Las Vegas competes with Monaco on any significant level for customers; Monaco is in the same business, but not really in the same market.

There are long-established casinos in Monaco and Macao. Are they both in the in the same market as Las Vegas casinos, or only in the same business?

peak and trough

There are two points or phases of the business cycle where U.S. estimates of GDP are most unreliable? Identify both.

very stable and good at ensuring survival, but very slow growing as well

Throughout history, traditional economies have tended to be

Italian

Under GDP accounting rules, the wages of Algerians working in Italy that are sent back to the Algeria are counted as part of _____ GDP.

yes; no; columbus weighed the costs against the benefits of the voyage as he saw it. he was wrong in his calculation, but he made a rational choice

Was Columbus rational? Was he correct? Why or why not?

no

Was there anything that Atlantic City could do to eliminate this competition?

planning could mean: everyone decides what to do; smart people are assigned to decide what to do; workers decide what to do with the capital that they work with; or the government appoints planners to decide what everyone should do

What could "planning" mean in regards to the theory of socialism?

nothing

What could Las Vegas casino owners do to stop creative destruction?

not a cyclical downturn, but rather a breakdown in the economy that would be permanent unless government acted to end it

What did J.M. Keynes think the Great Depression was?

sun spots

What did Jevons think caused the business cycle?

they joined the rush to Atlantic City

What did Las Vegas casino owners do to deal with this type of competition?

nothing

What did OPEC do (or could have done) to effectively eliminate or control creative destruction?

nothing

What did OPEC do (or could have done) to effectively eliminate or control product competition?

nothing

What did OPEC do (or could have done) to effectively eliminate or control the competition of capitals?

nothing

What did OPEC do to eliminate product competition?

planning in the Soviet Union was carried out by government bureaucrats who planned what each and every soviet enterprise would produce, where it was to be delivered, and how plan compliance was to be monitored. It was a Herculean task that sought balance rather than optimality.

What did planning actually mean or entail in the Soviet economy?

we use a "statistical discrepancy" entry to make them equal

What do the economists who keep the NIPA do when the income-approach measure of GDP differs from the expenditure-approach measure of GDP?

all other factors held constant

What does ceteris paribus mean or refer to?

workers are free to seek work elsewhere, but employers are also to fire them; in theory there is very little difference however, in practice, workers in the Soviet Union were often restricted as to where they could work, and Soviet firms rarely fired workers off.

What does free labor mean? How do socialism and capitalism differ on this point?

as everything else changes at the same time - the opposite of ceteris paribus

What does mutatis mutandis mean or refer to?

it refers to the rural, agrarian nature of all pre-capitalist economies - it took 90 percent of the work force working in the fields to feed themselves and the 10 percent upper crust that did work in agriculture

What does the 90-10 rule refer to?

unemployment rate

What economic statistic does the general public always watch to gauge the extent and strength of a recovery from a recession?

a V-shaped recession will usually have a sharper decline and a faster recovery compared to a U-shaped recession

What is a V-shaped recession and how does it differ from a U-shaped recession?

How can we make sure that the economy grows and develops? (Economic improvement is now a requirement)

What is our FOURTH Economic Question?

distribution based on need

What is the Communist Principle of Distribution?

+3.75%

What is the Federal Reserve's (i.e., the U.S. central bank) estimate of how fast the U.S. economy can grow?

why work and invest when there is no connection between what you contribute and what you get

What is the Incentives Problem encountered with Communist Distribution?

+1.7%

What is the benchmark for the growth rate of U.S. GDP per capita?

scarcity

What is the economic problem?

sufficient competition

What is the most important requirement needed to make Smith's Formula work or be applicable?

markets

What is the primary economic mechanism or institution in capitalism?

planning (bureaucratic planning is also correct)

What is the primary economic mechanism or institution in socialism?

creative destruction

What type of competition brought Resorts International to Atlantic City?

the competition of capitals

What type of competition lead other casinos to follow Resorts' lead?

arbitrage

What type of competition seeks to profit from price differentials?

product competition

What type of competition seeks to profit from profit differentials?

creative destruction

What type of competition stems from new products, new processes, new markets, and new forms of business organization?

creative destruction

What type of competition was responsible for Atlantic City's fall from being the "Queen of Resorts?"

frictional

What type of unemployment would better job information programs impact?

structural unemployment

What type of unemployment would the minimum wage impact?

any type of activity that is a do-it-yourself activity rather than a market transaction

What types of activities are included in household production?

+5% ; This was the third, or Final Estimate of this quarter's real GDP ; This is a fast rate of growth, well above the benchmark real GDP growth rate of +3%

What was the rate of growth of real GDP in the third quarter of 2014? Which estimate of real GDP was this? (i.e., advances estimate, preliminary estimate, or final estimate?) Was this fast growth or slow growth? (Use the benchmark in your answer.)

5.0%; basically full employment

What was the unemployment rate reported for the U.S. in September 2016? How would you interpret this? (high? low? Full employment? Below full employment?)

it will increase or worsen

What will always happen to a current account trade deficit during a recovery from a recession?

it will increase (or worsen)

What will always happen to a government budget deficit in a recession?

it will decrease and usually turn to a deficit

What will always happen to a government budget surplus as the economy goes into a recession?

this analysis is positive because Friedman is pointing out the actual consequences; while he does not think the minimum wage is a good policy (a normative position) his analysis is confined here to what actually happens

When Milton Friedman identifies the consequences of the minimum wage (i.e., who wins and who loses), is this analysis positive or normative? Why?

in the late 1970s

When did China begin the economic reforms that have basically dismantled the socialist economy in China?

December 2007

When did the Great Recession start?

no. explaining why an action is undertaken is never in itself a justification or an accusation.

When economists argue that the Son of Sam was rational, are they condoning his behavior or explaining his actions? Why?

about 5.0% - 6.0%

When we reach full employment in the U.S. economy today, what will the unemployment rate be?

end of January, 2025

When will the advanced estimate of Fourth Quarter 2014 U.S. GDP? Be released?

you might find it where people are seeking to avoid taxes, or when there is a complete breakdown of the economy or the money supply

Where or when might you find barter in a modern economy?

Great Britain

Which country was the first to break the 90-10 rule?

Great Britain

Which country was the first to experience the business cycle (or Trade Cycle)?

Capitalism. This is what capitalism does best; this is what socialist economies (to date) have done least well

Which economic system provides the most support and promotion for "entrepreneurship?"

the advance estimate

Which of our monthly estimates of quarterly GDP comes out first?

preliminary estimate

Which of the GDP estimates is most likely to differ from the previous estimate?

The Great Depression was the catalyst for the creation of macroeconomics

Which of the following events was the main reason for the development of macroeconomics?

consumption + investment + Government expenditures + (X-Im)

Which of the following is an accurate and consistent measure of GDP using the Expenditure Approach?

there was very little economic analysis and the limited reference to economics was largely confined to normative discussions

Which of the following is most true of economics before Adam Smith?

your opportunity costs of attending this class is measured by the value of what you have given up in order to participate in the class.

Which of the following is true about your opportunity cost in attending this class?

the market part of the economy and the part of the economy engaged in trade

Which part of the economy was responsible for the revival of Western European economies after 950 A.D., and again during the revival after 1500 A.D.?

structual

Which type of unemployment includes a person who cannot find a job because she lacks basic job skills and job experience?

discouraged worker

Which type of unemployment includes a person who has given up looking for a job because he thinks it is just a waste of time?

frictional

Which type of unemployment includes a person who is fired from his job?

seasonal

Which type of unemployment includes a person who is laid-off from a fish cannery that shuts down during the off-season?

cyclical

Which type of unemployment includes a person who looses a job due to lay-offs during a recession?

frictional

Which type of unemployment includes a person who quits in order to find a better job?

the poor, the unskilled,teens, workers entering the work force for the first time, and minorities because they have lower productivity that does not justify employment at the higher minimum wage. Consequently, they do not get a job at any (legal) wage rate. Without experience and on-the job skill-building, they remain unemployable at (legal) wage rates. (As a side note, Friedman's family immigrated to the U.S. in the early part of the 20th century. His father died and his mother went to work in a sweat shop at lower wages. Friedman always maintained that this was the only thing that saved the family and eventually got them better jobs and a better future. He also points out that the minimum wage (not in effect at that time) would have doomed them to perpetual poverty.)

Who does Milton Friedman argue actually suffer from the minimum wage? Why?

oil has very few good substitutes

Why did OPEC have such limited product competition to contend with?

Schumpeter argued that Roosevelt's New Deal policies actually slowed down the recovery

Why did Schumpeter think that the recovery from the depths of the Great Depression was so weak and took so long?

if the decisions to buy and sell a Pet Rock were not forced, then a voluntary exchange must make both the buyer and the seller better off - otherwise, they would not do it. If these two are clearly better off because of the transaction, and there are no significant third party costs to others, then society must be better off from the transaction

Why did Western economists argue that the Pet Rock had to be a good product?

Mexico enjoyed the advantages of higher world oil prices created by OPEC, but by staying out of the cartel, it did not have to restrict its output in order to maintain the cartel price

Why didn't Mexico join OPEC?

Arbitrage redirected oil to the boycotted countries

Why didn't the Arab boycott against the U.S. and The Netherlands work in 1973-74?

the Son of Sam obviously had problems with perceiving reality, but his actions were rational within the reality that he perceived

Why do economists think that a serial killer like the Son of Sam was rational?

because capitalism seem to always generate critics and opponents who embrace socialism as an alternative to the evils (real or perceived) that they associate with capitalism

Why does Prof. St. Clair think that socialism will return?

the recovery of the unemployment rate will always severely lag in the recovery of the economy

Why should you never watch the unemployment rate during a recovery from a recession in order to gauge the extent and strength of the recovery?

to Hayek, the fatal conceit of socialism - and with the Pet Rock - is the belief that people cannot know what is good for them, but planners can

With regard to the Soviet view of the Pet Rock, what would Freidrich Hayek say was the fatal conceit?