Chapter 15: Introducing macroeconomics

Define Microeconomics

What types of questions are asked in microeconomics ?

Microeconomics studies the small components of the economy. Who are the 4 main components ?

What is macroeconomics ?

What does macroeconomics attempt to explain

What type of questions does macroeconomics attempt to answer?

Rather than the small components of the economy, Macroeconomics examines what ?

How does ceteris paribus apply to macroeconomics ?

Economists from different schools of thought hold different views on what two main things ?

Define free-market economists

What do free-market economists believe about the economy provided what factor occurs ?

Free-market economists believe that optimal resource allocation in a competitive market economy can be achieved by what ?

In competitive markets, what automatically ensures the economy is on its production possibility frontier ?

What do competitive market forces bring about ? (aim to achieve)

Define the Keynesian school of thought

Keynesian economists believe what about the link between unemployment and spending ?

Too little spending and too much saving means the economy produces where in the PPF ?

Consumer income stimulates and causes what ?

When economic growth is lacking, what do Keynesian economists believe should happen ?

What is the Keynesian opinion of markets ?

Define 'depression'

In the 1920s and 1930s, economics was dominated by what school of thought ?

During the time between the 1920s and 1930s, Free-market economists generally believed what about the outcome of a competitive market economy ?

Define competitive market

What was the problem with free market forces in the UK and wider economies in the 1920s and in the USA in the 1930s ?

What did unregulated markets produce ?

When did the Great depression begin ?

In 1933, unemployment rose to almost 25% in what country ?

In 1931, unemployment rose to around 24% in what country ?

What argument did Free-market economists put across as a response to the great depression ?

Who did free-market economists blame particularly ? why ?

In the 1920s and 1930s, free-market economists believed that persistent mass unemployment was caused by what ?

Draw an AD AS diagram illustrating the economy's aggregate labour market to show what happens with high wage rates

The 1920s was a period of what in the USA ?

In the 1920s, free-market economists believed what about labour markets and full employment?

Explain what an aggregate labour market in equilibrium is

What happens when trade unions restrict the supply of labour in order to fix a real wage rate higher than the market-clearing wage rate ?

State a labour market imperfection which prevents the unemployed being priced into jobs

What are inflexible wage rates also known as ?

In the 1920s and 1930s, free-market economists believed that the most important cause for mass unemployment was what instead of governments ?

John Maynard Keynes started his career as what type of economist ?

Did Keynes believe that the economic system is self-adjusting?

Did Keynes believe that the source of our economic troubles lied in the conditions of supply or the conditions of demand ?

Keynes believed that the failure of effective demand to reach the full potential of supply was due to what ?

The Keynesian era extended from the late 1940s and early 1950s to when ?

Keynesian revolution of 1930s replaced what ?

Overall, Keynesian economic policy centers on what ?

More than 2 decades after the late 1940s, the UK government used what two types of policy to increase aggregate demand ?

Keyensian economists focused on increasing aggregate demand to be rid of what ?

Expansionary policies sometimes created what consequences ?

To relieve inflationary pressures in the economy, governments had to do what in the Keynesian era ?

In the 1930s, free-market economics gave way to what ?

After WW2, Keynesianism dominated as long as keynesian demand-management policies delivered what?

In the 1970s, what happened in terms of macroeconomic policy objectives and Keynesian economics

The 1970s became a decade of what for Keynesian economics

The failure of Keynesianism led to what ?

What was an important part of the free-market revival in the 1970s and 1980s ?

Monetarists believe what about inflation ?

Monetarists believe that if a government wishes to control inflation, they must do what first ?

In the monetarist era, which policy was elevated to become the main macroeconomic policy ?

Instead of being used to manage aggregate demand, monetary policy was solely used to control what ?

In 1985, the UK government largely abandoned what type of policies and why ?

The relationship between the money supply and what broke down after the UK government attempted to tightly control the growth of the money supply

On 18th October 2015, the financial times ran the headline 'Monetarism is dead' in response to what governmental decision ?

Free-market theories continued to dominate macroeconomic agenda, however, they were rebranded as what ?

To separate them from supply-side policies advocated by free-market economists, Keynesian demand-management policies are usually called what ?

What is supply-side economics ?

Are supply-side policies more macroeconomic or microeconomic ?

In the early days of supply-side economics, the UK government argued for what ?

What did the government argue for macro policy ?

The government argued that micro policy should be used to promote what ?

give 3 examples of supply-side policies used for enterprise

Give 2 examples of supply-side policies used for Capital

Give 2 examples of supply-side policies for Human factors

Give 2 examples of supplys-side policies for Markets

From 2003 - 2008 the UK felt what in terms of economic growth ?

What were conflicts like between free-market economists and Keynesian economists ?

What did members of both schools of thought agree about ?

Many free-market economists accepted what Keynesian argument?

What is used to achieve the inflation rate objective set by the government ?

From 2003 - 2008, what was allowed to expand so there was sufficient demand in the economy to absorb the extra output that successful supply-side policies enabled the economy to produce ?

During the years of 2003 - 2008, what type of policies were used to supplement supply-side policies ?

2 years following the onset recession in 2008, what was this period called ?

There was contemporary revival in using what type of policy to manage aggregate demand in the 2 years following the 2008 recession ?

Why was fiscal stimulus quickly abandoned after 2010 ?

In 2013, the UK experienced the opposite policy of fiscal austerity, called what ?

Instead of being raised or lowered, the Bank of England's interest rate has kept at what rate ?

In a new monetary policy, what two things may be targeted rather than inflation ?

With the help of a productive possibility diagram, explain one cause of unemployment (12 marks)

Explain how monetary policy is currently implemented in the UK (12 marks)

A few years ago, a British chancellor of the exchequer claimed that his policies had eliminated the problem of 'boom and bust' in the UK. Assess the extent to which this was true (25 marks)

''Mass unemployment and recessions are perhaps the most significant of all market failures''

''governments, and not markets, are responsible for mass unemployment and recessions'' Evaluate these two statements. (25 marks)