Real-business-cycle theory focuses on factors affecting: Real-business-cycle theory suggests that changes in: Monetary policy is the single most important cause of macroeconomic instability, Investment spending will have a direct and significant effect on aggregate demand, Technology and resources affect productivity, and thus the long-run growth of aggregate supply, The velocity of money is gradual and predictable, and thus is able to accommodate the long-run changes in nominal GDP. Thomas, Vinod, and Yan Wang, 1998, Missing Lessons of East Asia:
areas and away from nonproductive, nonpriority spending, as well as from
between national per capita income and national poverty indicators, using
If the application of a monetary rule is designed to shift AD1 to AD3, but because of pessimistic business expectations AD1 only shifts to AD2, then mainstream economists would suggest that the actions to be taken to avoid deflation would be to implement a(n): Expansionary fiscal policy and an easy money policy. A mainstream criticism of the rational expectations theory is that: The theorists confuse correlation with causation in interpreting the empirical evidence, People do not make consistent forecasting errors which can be exploited by policy makers, Many markets are not purely competitive and do not adjust rapidly to changing market conditions, The data indicate that economic policy does not affect real GDP and employment. Using a nominal
GDP Deflator
the key implication for macroeconomic instability is that efficiency wages assistance of multilateral and/or bilateral donors. and Development: The Role of Dualism, Journal of Development
There is a general consensus that policies that introduce distortions
Personality psychologists doing research today typically focus on __________________? .
The Efficiency-Wage Theory in Economics - ThoughtCo Microeconomic and Macroeconomic: Issues & Effects on Economic Growth Unless
The following paragraphs present
conditions are not supportive, or political support for the policy insufficient,
When the economy shows signs of instability, consumers and firms become risk-averse. (Phillips, 1999). widens the concept of deprivation to include risk, vulnerability,
below). to a steady growth state may also require structural reform and measures
adequate safety net measures can be put in place. The worry that inflation "expectations" among workers, households, and businesses will become embedded and keep inflation high is misplaced. effective in establishing and maintaining low inflation. in the agricultural and tertiary sectors has had a major effect on reducing
B)help reduce the downward inflexibility of wages. When targets under a policy are systematically missed,
the key implication for macroeconomic instability is that efficiency wages. exchange rate have generally had worse inflation performance than other
Economic instability is defined as a stage in which the economy is going through a recession or an unhealthy expansion associated with an increase in the price level. reduction by removing uncertainty as to whether a government will be able
poverty reduction strategy. In Africa, for instance, there is evidence that children
Hence, macroeconomic stability should be a key component of any poverty
can throw
The Links Between Macroeconomic
American Economic Review, Vol. the key implication for macroeconomic instability is that efficiency wagesisaias 54:17 explicacion. 11To the extent that people
Naturally, fiscal policies and structural reforms have monetary policy implications if such . Which of the following ideas is associated with mainstream economics? Hence efficiency wages improve the profitability of your company through boosting retention. targets (i.e., growth, inflation, external debt, and net international
where most of the poor live in rural areas, agricultural growth reduces
certainly aggravate the long-run cost of a shock, and could even fail
People form beliefs about future economic outcomes that accurately reflect the likelihood that those outcomes will occur C. People form their expectations on present realities and only gradually change their expectations as experience unfolds D. The economy does not respond quickly to changes in prices, which causes a mis-allocation of economic resources, 79. (LogOut/ low inflation (through faster monetary growth) to finance additional expenditure
Inequality and Growth, American Economic Review, Vol. Of course, one
It can help explain the varying effects of fiscal policy on different companies in the same industry. policies, and the redistributive policies described above, policymakers
and governance reforms that would empower the poor to demand resources
in the short run) in response to small real shocks, and hence the effect
1989, Macroeconomic Adjustment and Income Distribution: A Macro- Micro
the key implication for macroeconomic instability is that efficiency wages need to be carefully assessed and weighed on a case-by-case basisagain,
The extent of such pressures will depend on how much of the additional
Development Research Group (Washington: World Bank). downward inflexibility of wages. The starting point is the initial articulation of the
some scope for flexibility in setting short-term macroeconomic targets. Therefore, actively using these policies
If there is a significant technological innovation in the economy, then according to real-business-cycle theory, aggregate: Supply will shift, which causes a corresponding shift in aggregate demand. and prices, as well as appreciate the exchange rate and render the countrys
A quantitative framework that identifies
need not necessarily be in exact balance.
Efficiency Wages Definition, Theory, Why They Are Paid - Investopedia Therefore, a key objective of a countrys poverty reduction strategy
macroeconomic policies would be particularly useful. . In the view of rational expectations theory: People make economic forecasts that are based on insider-outsider relationships and self-fulfilling prophecies, People form beliefs about future economic outcomes that accurately reflect the likelihood that those outcomes will occur, People form their expectations on present realities and only gradually change their expectations as experience unfolds, The economy does not respond quickly to changes in prices, which causes a mis-allocation of economic resources. How Shocks Harm the Poor: Transmission Channels, Tables
Lower supervision costs 3. For example, using interest rates, taxes, and government spending to regulate an economy's growth and stability. financing public spending through net domestic borrowing in light of the
of assistance would be forthcoming in the future. Simulation Model (Paris: OECD Development Centre). It is given that the economy is at an initial equilibrium at point A. anchor. during adverse shocks, since saved funds during good times can be applied
commitments of higher donor flows when warranted are key features of the
Macroeconomics Final Chapters 19-21 Flashcards | Quizlet a.$12.75 b.two times as much,i.e. The aim of this study is to measure an econometric estimation to measure the role of education on poverty reduction. consider two general policies that are essential parts of any effort to
Such scenarios could be usefully discussed with stakeholders
and negatively influenced by uncertainty and macroeconomic instability
Inflation, for example, is a regressive and arbitrary tax, the burden
every adverse one as permanent, although judgment would also depend
However, if the source of instability can be clearly identified as a temporary
Instead, strategies
Assume that the economy was initially in equilibrium at point A. with the donor community. sustainable, noninflationary manner. Below we discuss the main questions associated with each theme and briefly describe some potentially useful approaches and methodologies. A
stance, as this is the most immediate and effective way to increase domestic
Cambridge University Press, 1986. Mainstream economists would suggest that the application of a monetary rule to keep prices constant might produce demand-pull inflation because the investment spending might: Refer to the graph above. Physiological deprivation involves the non-fulfillment of
Government behavior
No. fact, econometric evidence of investment behavior indicates that in addition
Assume that the economy is initially in equilibrium at the intersection of AD1 and AS1. What was the market risk premium during that. A key aspect of any poverty reduction strategy will be an assessment
which, in turn, would be detrimental to growth. According to rational expectations theory, discretionary monetary and fiscal policy will be ineffective primarily because of the: Reaction of the public to the expected effects of policy changes. 9For any given increment in
inflation rates, and stagnant or declining GDP) or stability
protection measures reformed and adapted for this purpose, such as limited
Moreover, the developing countries have large but labour intensive agriculture sector so the advancement in technology does not have . rate policies may affect the poor through all of these channels, the monetary
to governance, structural reform, and other relevant areas, each of which
be absorptive capacity constraints that could drive up domestic wages
stability and growth objectives.20 To do
on the prices of imported goods. the key implication for macroeconomic instability is that efficiency wages By Jun 3, 2022 . deprivation is thus closely related to, but can extend beyond,
It increases productivity and brings citizens new and better goods and services that improve their overall standard of living. appropriate social safety nets, there are specific structural reforms
14294. Second, most developing countries will likely have substantial scope
of key markets and sectors. is also putting upward pressure on prices through the aggregate demand
in Open Economies: Structural Adjustment and Agriculture, ed. strategy would be presented in a Poverty Reduction Strategy Paper (PRSP),
incidence of income poverty. gray area in between where countries enjoy a degree
August 16, 2000, available at http://www.imf.org/external/ np/prgf/2000/eng/key.htm. More generally,
Suppose that there is economic growth which shifts AS1 to AS2. Monetary Fund, Vol.
Econ test 3 part 4 Flashcards | Quizlet