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10 Cards in this Set
- Front
- Back
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Classical view
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View that macroeconomics generalizations led to a capitalistic economy and was self-regulating and therefore would usually employ its resources fully.
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Keynesian View
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Macroeconomic generalizations that lead to the conclusion that a capitalistic economy is characterized by macroeconomic instability and that fiscal policy and monetary policy can be used to promote full employment, price-level stability, and economic growth.
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Monetarism
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The macroeconomic view that the main cause of changes in aggregate output and price level is fluctuations in the money supply; espoused by advocates of a monetary rule.
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Equation of exchange
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MV=PQ, in which M is the supply of money, V is the velocity of money, P is the price level, and Q is the physical volume of final goods and services produced.
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velocity
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The number of times per year that the average dollar in the money supply is spent for final goods and services, nominal GDP divided by the money supply
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real-business-cycle theory
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A theory that business cycles result from changes in technology and resource availability, which affect productivity and thus increase or decrease long-run aggregate supply.
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new classical economics
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Theory that although unanticipated price-level changes may create macroeconomic instability in the short run, the economy is stable at the full-employment level of domestic output in the long run because prices and wages adjust automatically to correct movements away from the full employment, noninflationary output.
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price-level surprises
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Unanticipated changes in the price level.
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efficiency wage
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A wage that minimizes wage costs per unit of output by encouraging greater effort or reducing turnover.
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monetary rule
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The rule that the money suply should be expanded each year at the same annual rate as the potential rate of growth of the real gross domestic product; the supply of money should be increased steadily between 3 and 5 percent per year.
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